Final answer:
The excess reserves (E) can be found by subtracting the required reserves (checking deposits × reserve ratio) from the actual reserves. In this case, the bank's excess reserves are $60,000.
Step-by-step explanation:
If reserves are $180,000 and checking deposits are $1,200,000, and the reserve ratio (R) is 10%, the student is likely asking to calculate the excess reserves (E), which are the reserves that the bank holds above the required minimum. Since the checking deposits are $1,200,000, and the required reserve ratio is 10%, the bank is required to have $120,000 (10% of $1,200,000) in reserves. Given that the bank actually has $180,000 in reserves, we then subtract the required reserves from the actual reserves to find the excess reserves (E).
To calculate this, the formula is:
E = Actual reserves - (R × Deposits)
So, the calculation would be:
E = $180,000 - (0.10 × $1,200,000)
This gives us the result:
E = $180,000 - $120,000 = $60,000
Therefore, the bank has $60,000 in excess reserves.