First National Bank (FNB) has a reserve ratio of 20 percent, a required reserve ratio of 10 percent, and deposits of $1,000. If FNB receives an additional deposit of $100, Group of answer choices then it has required reserves of $210 and holds excess reserves of $10. then it has required reserves of $10 and holds excess reserves of $20. then it has required reserves of $110 and holds excess reserves of $190. then it has required reserves of $110 and holds excess reserves of $0.

Question

Keon Avery

Business

10 November, 15:09

First National Bank (FNB) has a reserve ratio of 20 percent, a required reserve ratio of 10 percent, and deposits of $1,000. If FNB receives an additional deposit of $100, Group of answer choices then it has required reserves of $210 and holds excess reserves of $10. then it has required reserves of $10 and holds excess reserves of $20. then it has required reserves of $110 and holds excess reserves of $190. then it has required reserves of $110 and holds excess reserves of $0.

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Answers (1)

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Simone · Answer 1

The correct answer is then it has required reserves of $110 and holds excess reserves of $190.

Explanation:

According to the scenario, computation of the given data are as follows:

Total deposit = $1,000 + $100 = $1,100

So, we can calculate the total reserve required by using following formula:

Total reserve required = 10% * Total deposit

= 10% * $1,100 = $110

And Previous excess = $100

Current access = $90

So, Excess reserve = Previous excess + Current access

= $100 + $90

= $190