Question

If a bank has $120 million in deposits and $25 million in reserves with a reserve requirement of 0.15 , Instructions: Round your responses to one decimal place. how much are its required reserves?

Answer 1

The required reserves for the bank with $120 million in deposits and a reserve requirement of 0.15 are $18 million.

Step-by-step explanation:

The required reserves can be calculated by multiplying the deposit amount by the reserve requirement ratio. In this case, the reserve requirement is 0.15 (or 15%). So, the required reserves can be calculated as:

Required Reserves = Deposit amount x Reserve Requirement Ratio

Required Reserves = $120 million x 0.15

Required Reserves = $18 million

Therefore, the bank is required to hold $18 million in reserves.