Bank A has checkable deposits of $100 million, vault cash equaling $1 million and deposits at the Fed (reserves) equaling $14 million. If the required reserve rate is ten percent what is the maximum amount Bank A could lend

Amount that Bank A can lend = (115 - 11.5) = $103.5 million

Explanation:

Bank A has checkable deposits of $100 million, vault cash equaling $1 million and deposits at the Fed (reserves) equaling $14 million. If the required reserve rate is ten percent what is the maximum amount Bank A could lend

Reserve requirement is the rate that banks must keep in reserve and are not allowed to lend.

Total amount with Bank A = $100 + $1 + $14 = $115 million

Required Reserve at 10% = $11.5 million

Amount that Bank A can lend = (115 - 11.5) = $103.5 million

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