Question

Suppose the target reserve ratio is 10 percent. if urban bank has total deposits of $1,000 and total assets of $10,000, the amount of desired reserves iss__________:

a. $100
b. $1100
c. $1000
d. $900
e. $9000

Answer 1

With a target reserve ratio of 10 percent and total deposits of $1,000, Urban Bank's desired reserves would be $100, answer option a.

Step-by-step explanation:

The student's question asks for the amount of desired reserves for a bank with a 10 percent target reserve ratio and total deposits of $1,000. Desired reserves are calculated by multiplying the total deposits by the target reserve ratio. Therefore, the correct answer is:

• a. $100

Desired reserves = Total deposits × Target reserve ratio

= $1,000 × 10%

= $1,000 × 0.10

= $100

Thus, with a target reserve ratio of 10 percent and total deposits of $1,000, the Urban Bank's desired reserves would be $100.