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21 March, 10:15

Assume a bank has $5 million in deposits and $1 million in vault cash. If the bank holds $1 million in excess reserves and the required reserves ratio is 8 percent, what is the minimum required reserve?

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  1. 21 March, 10:17
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    Minimum Required Reserve are 1.33

    Explanation:

    The formula for the calculation of Cash reserve ratio is as follows:

    Cash Reserve Ratio = Reserve Requirement x Bank Deposits

    Cash Reserve Ratio = Reserve Requirement x (Bank deposit + cash in vault)

    8 = Reserve Requirement x (5 + 1)

    8 = Reserve Requirement x 6

    Reserve Requirement = 8/6

    Reserve Requirement = 4/3

    Reserve Requirement = 1.33
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Home » Business » Assume a bank has $5 million in deposits and $1 million in vault cash. If the bank holds $1 million in excess reserves and the required reserves ratio is 8 percent, what is the minimum required reserve?
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