Assume the required reserve ratio is $$ 9 \% $$, the amount of deposits in a bank are $$ \$ 1,390 $$, and the bank is holding $$ \$ 577 $$ in reserves. What is the maximum amount of additional loans this bank can make? Please round to two decimal places and do not include the dollar sign. For example, if your answer is $$ \$ 5678.977 $$ you would enter 5678.98 .

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UpStudy AI · Accepted Answer

To find the maximum amount of additional loans a bank can make, we need to calculate the excess reserves and then determine the maximum amount of loans that can be made using those excess reserves.

Given:
- Required reserve ratio = 9%
- Amount of deposits in the bank = $1,390
- Amount of reserves held by the bank = $577

1. Calculate the required reserves:
Required reserves = Required reserve ratio * Amount of deposits
Required reserves = 0.09 * $1,390

2. Calculate the excess reserves:
Excess reserves = Amount of reserves held - Required reserves

3. Calculate the maximum amount of additional loans:
Maximum loans = Excess reserves

Let's calculate these values step by step.
Calculate the value by following steps:
- step0: Calculate:
  $$0.09	imes 1390$$
- step1: Multiply the numbers:
  $$125.1$$
The required reserves are $125.10.

Now, let's calculate the excess reserves.
Calculate the value by following steps:
- step0: Calculate:
  $$577-125.1$$
- step1: Subtract the numbers:
  $$451.9$$
The excess reserves are $451.90.

Therefore, the maximum amount of additional loans this bank can make is $451.90.
Maximum loans = $451.90

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