Suppose that National Bank of Guerneville has 35 million in

Suppose that National Bank of Guerneville has $35 million in checkable deposits, Commonwealth Bank has $46 million in checkable deposits, and the required reserve ratio for checkable deposits is 10%. If National Bank of Guerneville has S4 million in reserves and Commonwealth has S5 million in reserves, how much in excess reserves does each bank have? (Enter your answers rounded to one decimal place.) National Bank of Guerneville has million in excess reserves.

Solution

National Bank of Guerneville has $35 mn is deposits and required reserve ratio =10%

Required reserves for National Bank of Guerneville =$35mn*0.1=$3.5mn

National Bank of Guerneville has Reserves of $4mn

Excess Reserves=Reserves-Required Reserves=$4mn-$3.5mn=$0.5mn