Asked by Nicholas Pride on Jun 11, 2024
Verified
If Suntrust Banks have demand deposits of $10 billion,actual reserves of $2 billion,and the reserve requirement is 18%,the bank's excess reserves are
A) $180 million.
B) $200 million.
C) $360 million.
D) $400 million.
E) $1 billion.
Excess Reserves
The capital reserves held by a bank or financial institution in excess of what is required by regulators, central bank, or other financial authority.
Actual Reserves
The total reserves held by a bank, consisting of both required reserves and any excess reserves not needed to meet central bank requirements.
- Gain insights into the components and quantifications of bank reserves, including overall, required, and extra reserves.
Verified Answer
JY
Jenna YuranJun 16, 2024
Final Answer :
B
Explanation :
The reserve requirement is 18%, so the required reserves will be 18% of $10 billion, which is $1.8 billion. Since the bank has actual reserves of $2 billion, excess reserves will be actual reserves minus required reserves, which is $2 billion - $1.8 billion = $200 million. Therefore, the correct answer is B) $200 million.
Learning Objectives
- Gain insights into the components and quantifications of bank reserves, including overall, required, and extra reserves.