Question

Bank A has checkable deposits of $510 million and total reserves of $55.2 million. The required reserve ratio is 9 percent. The bank has excess reserves of ____ million.

A. $9.3
B. $50.2
C. $454.8
D. $45.9
E. There is not enough information provided to answer this question.

Answer 1

Bank A has excess reserves of $9.3 million. Therefore, the correct option is A.

Step-by-step explanation:

To determine the excess reserves of Bank A, we need to subtract the required reserves from the total reserves. The required reserve ratio is given as 9 percent. We can calculate the required reserves by multiplying the checkable deposits by the required reserve ratio. In this case, the required reserves are $510 million x 9% = $45.9 million. The excess reserves are then $55.2 million - $45.9 million = $9.3 million.