Question

Suppose that National Bank of Guerneville has ​$33 million in checkable​ deposits, Commonwealth Bank has ​$41 million in checkable​ deposits, and the required reserve ratio for checkable deposits is​ 10%. If National Bank of Guerneville has​ $4 million in reserves and Commonwealth has​ $5 million in​ reserves, how much in excess reserves does each bank​ have?

Answer 1

National Bank of Guerneville : $4mn - $3.3mn = $0.7 million.

Commonwealth Bank : $5mn - $4.1mn = $0.9 million.

Step-by-step explanation:

Since the reserve ration for the checkable deposits is 10%, that means the National bank of Guerneville has to maintain $3.3 million in the reserves, while it maintains $4 million, hence excess of $0.7 million.

Secondly, Commonwealth bank has to maintain $4.1 million in the reserves, while it maintains $5 million, hence excess of $0.9 million.

Hope this clear things up.

Good Luck.