Question

Suppose a bank received a deposit of $425 million in a checking account and the desired reserve ratio is 11%

Round your final answers to 2 decimal places. Do not enter the comma "," a dollar sign (\$) or units (zeros or millions) while entering your answer.
The bank must hold $___ milion in the form of target reserves?
The amount of additional loanable funds the bank has received from this deposit of $425 million is equal to $___ million.

Answer 1

The bank must hold $46.75 million in the form of target reserves. The amount of additional loanable funds the bank has received from this deposit of $425 million is equal to $378.25 million.

Step-by-step explanation:

To calculate the amount of target reserves a bank must hold, we need to multiply the deposit amount by the desired reserve ratio. In this case, the deposit is $425 million and the reserve ratio is 11%. So, the target reserves would be $425 million * 0.11 = $46.75 million.

The amount of additional loanable funds the bank has received from this deposit can be calculated by subtracting the target reserves from the deposit amount. So, the additional loanable funds would be $425 million - $46.75 million = $378.25 million.