Answered: A new bank has vault cash of $1.7…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

A new bank has vault cash of $1.7 million and $5 million in deposits held at its Federal Reserve District Bank.

a) the required reserves ratio is 8 percent, approximately what dollar amount of deposits can the bank hold? (Answer in millions)

Bank deposits

$Type your answer here million

b) If the bank holds $72 million in deposits and currently holds bank reserves such that excess reserves are zero, what required reserves ratio is implied? (Round answer to 1 decimal place, e.g. 5.1.)

Required reserves ratio

Type your answer here

Definition Definition Capital reserves held by banks or financial institutions over and above the reserves that are required to be maintained by the regulator toward its liabilities and for internal controls. For commercial banks, excess reserve is the amount over the standard reserve as decided by the central bank. These excess reserve funds are available in the form of cash and cash equivalents.

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