Question

Bank of Central Texas has $5,550 in checkable deposits, $390 in reserves and loans at $5,160. Assume that the required reserve ratio is 4%.   A customer then withdraws $X and afterwards, the bank has zero excess reserves. What is X?

Group of answer choices

A) $155

B) $159

C) $175

D) $181

Answer 1

Required reserve ratio is 4% of checkable deposits which means required reserves are 4% of 5550 or 222. In this manner excess reserves are 390-222 = 168

Deposits after withdrawal are (5550 - x) and required reserve ratio is 4% of (5550 - x) or 222 - 0.04x. they are no excess reserves which means required reserves plus loan amount should be equal to deposits

222 - 0.04x + 5160 = 5550 - x

222 + 0.96x = 390

This implies x = (390-222)/0.96 = 175

Select option C