Question

if a bank has 120 million in deposits and 7 million in reserves with a reserve requirement of 0.05 how much its required reserves

Answer 1

the required reserve is $6 million

Step-by-step explanation:

The computation of the required reserve is shown below:

= Deposits made × reserve requirement ratio

= 120 million × 0.05

= $6 million

hence, the required reserve is $6 million

We simply applied the above formula so that the correct value could come

And, the same is to be considered

Also we ignored the reserves as it is not relevant