As the executive of a bank or thrift institution you are faced with an intense seasonal demand for loans. Assuming that your loanable funds are inadequate to take care of the demand, how might your Reserve Bank help you with this problem?
A new bank has vault cash of $1 million and $5 million in deposits held at its Federal Reserve District Bank.
a. If the required reserves ratio is 8 percent, what dollar amount of deposits can the bank have?
b. If the bank holds $65 million in deposits and currently holds bank reserves such that excess reserves are zero, what required reserves ratio is implied?
Assume that banks must hold a 2 percent reserve percentage against transaction account balances up to and including $40 million. For transaction accounts above $40 million, the required reserve percentage is 8 percent. Also assume that Dell National Bank has transaction account balances of $200 million.
Calculate the dollar amount of required reserves that Dell National Bank must hold.
What percentage of Dell’s total transaction account balance must be held in the form of required reserves?
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