Answer to Question #240726 in Finance for Oywa

Question #240726
The ABC bank has a deposit base on which it holds excess reserves of $42 Million at a reserve rate which relates to a money multiplier (MM) of 5. On January 2, 2010 Mwen-Mwen, a customer of ABC bank issued a $20 Million check drawn on its account, to Bushrod Manufacturing Company (BMC), which it deposited into its account with Satiah Bank.
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Expert's answer
2021-09-24T11:27:10-0400

Question: find the reserve ratio

Money multiplier"=\\frac{1}{Reserve\\space ratio}\\\\5=\\frac{1}{Reserve\\space ratio}\\\\=Reserve\\space ratio=\\frac{1}{5}=20\\%"



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