A bank has 150000 of checkable deposits and a required reser

A bank has $150,000 of checkable deposits and a required reserve ratio of 5 percent. The bank currently holds $142,500 in reserves. How much of these reserves are excess reserves? Excess reserves are $ (Round your response to the nearest dollar.)

Solution

Ans : Excess reserves are $ 135,000

Explanation :

The bank is required to maintain a 5 % reserve ratio of $150,000 checkable deposits.

Total required reserves = 5 % or 0.05 * $150,000 = $ 7,500

Excess reserves = Total reserves - required reserves

= $ 142,500 - $7500

= $ 135,000