An analyst gathers the following information about Monument State Bank: • Demand deposits $400 million • Loans and securities $260 million • Reserve requirement 10% • The bank has a total of $50 million in cash and deposits with the Federal Reserve. Monument State Bank is in a position to make additional loans of: A. $5 million. B. $10 million. C. $26 million. D. $40 million.
B. 10% of 400 = $40 Million required reserves. Therefore, 50-40 = 10 Million additional loans.
Thanks ditchdigger2CFA. Seems like I over read the problem too much…
Is it right?
Yea, it’s correct.