Question

Allowance bank received a deposit of 28,000 and is free to lend out 25,480 what is the reserve rate?

Answer 1

Reserve rate = 9%

Explanation:

Reserve ratio/rate is the percentage of deposits which commercial banks are required to keep as cash, as directed by the central banks.

first, let us calculate the reserve amount as follows:

Reserve = Deposit - (free amount to lend out)

Reserve = 28,000 - 25,480 = $2,520

`Reserve\ rate = (Reserves)/(Deposits) *100\\Reserve\ rate = (2520)/(28000) *100\\=(252000)/(28000) =9\%`

Therefore the reserve rate = 9%