Scenario 11-2 A Bank's Assets Consist of $1 000 000 in Total

question 140

Multiple Choice

Scenario 11-2
A bank's assets consist of $1 000 000 in total reserves, $2 100 000 in loans, and a building worth $1 200 000. Its liabilities and capital consist of $3 000 000 in demand deposits and $1 300 000 in capital.
-Refer to Scenario 11-2.If the desired reserve ratio is 20 percent,what is the level of the bank's excess reserves and how much could it loan out as a result?

• A)Excess reserves are $400 000, and it could loan out $2 000 000.
• B)Excess reserves are $600 000, and it could loan out $600 000.
• C)Excess reserves are $400 000, and it could loan out $400 000.
• D)Excess reserves are $600 000, and it could loan out $3 000 000.

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