Suppose that a bank has accepted $20,000 in checking deposits, $40,000 in savings deposits, has $10,000 in cash reserves, and made $50,000 in loans. What is the bank's reserve ratio?

a) 10%

b) 16.6%

c) 20%

d) 25%

16.67%

Explanation:

The computation of the bank reserve ratio is shown below:

= Cash reserves : total deposits * 100

where,

Cash reserve is $10,000

And, the total deposits would be

= Checking deposits + saving deposits

= $20,000 + $40,000

= $60,000

Now put these values to the above formula

So, the ratio would equal to

= $10,000 : $60,000 * 100

= 16.67%