Question

solo savings bank received an initial deposit of $6000 it kept a percentage of this money in reserve based on the reserve rate and loaned out the rest the amount it loaned out was eventually all deposited back in the bank if the cycle continued indefinitely and eventually the $6000 turned into $200000 what was the reserve rate?

Answer 1

Reserve rate = 3%

Explanation:

Reserve Ratio = Reserve Maintained with Central Bank / Deposit Liabilities × 100

Reserve maintained = $6,000

Deposit liabilities = $200,000

Reserve Rate = Reserve Maintained with Central Bank / Deposit Liabilities × 1000

=$6,000 / $200,000 × 100

=0.03 × 100

r=0.03 × 100

=3%

Therefore,

Reserve Rate =3%