"A commercial bank has actual reserves of $1 million and checkable-deposit liabilities of $9 million, and the required reserve ratio is 10 percent. The excess reserves of the bank are:
A) $100,000.
B) $1 million.
C) $900,000.
D) $50,000."

Question

06-12-2019
Business

contestada

"A commercial bank has actual reserves of $1 million and checkable-deposit liabilities of $9 million, and the required reserve ratio is 10 percent. The excess reserves of the bank are:
A) $100,000.
B) $1 million.
C) $900,000.
D) $50,000."

Respuesta :

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waliuahmed26 waliuahmed26 · Answer 1 · 2019-12-06T07:21:18+01:00

Answer: The correct answer is A. $100,000

Explanation: The reserve requirement is a regulation by the central bank that sets the minimum amount of reserves that must be held by a commercial bank.

The reserve ratio is the portion of checkable- deposit liablities that commercial banks must hold onto, rather than use for it's primary activities.

Excess reserves occurs in a situation where the actual reserves is greater than the estimated reserves

Computation of Execess reserve: Here, It is set at 10% of the checkable-deposit liabilities which is $9million

10% of $9,000,000 = $900,000

Actual reserves - Estimated Reserves = Excess reserves

$1,000,000 - $900,000 = $100,000

"A commercial bank has actual reserves of $1 million and checkable-deposit liabilities of $9 million, and the required reserve ratio is 10 percent. The excess reserves of the bank are: A) $100,000. B) $1 million. C) $900,000. D) $50,000."

Respuesta :

Otras preguntas

"A commercial bank has actual reserves of $1 million and checkable-deposit liabilities of $9 million, and the required reserve ratio is 10 percent. The excess reserves of the bank are:
A) $100,000.
B) $1 million.
C) $900,000.
D) $50,000."