a bank has a 5 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the…

a bank has a 5 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement. it has $25 in reserves and $4,975 in loans. it has $250 in reserves and $4,750 in loans. it has $1,000 in reserves and $4,000 in loans. none of the above is correct.

a bank has a 5 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement. it has $25 in reserves and $4,975 in loans. it has $250 in reserves and $4,750 in loans. it has $1,000 in reserves and $4,000 in loans. none of the above is correct.

Answer

Explanation:

Step1: Calculate reserve amount

Reserve amount = Deposit amount × Reserve - requirement ratio. Given deposit amount = $5000$ and reserve - requirement ratio = 5% = 0.05. So, reserve amount = $5000\times0.05=$250$.

Step2: Calculate loan amount

Loan amount = Deposit amount - Reserve amount. So, loan amount = $5000 - 250=$4750$.

Answer:

It has $250 in reserves and $4,750 in loans.