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Question on balance sheet of Yukon Bank

Assume the Yukon Bank has the given simplified balance sheet. The reserve ratio is 6.25 %.

16_simplified balance sheet.png

Determine the maximum amount of new loans which this bank can make? Illustrates in column 1 how the bank's balance sheet will seem after the bank has loaned this added amount.

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Desired reserves are 6.25% of $100,000 will be $6,250.

Actual reserves is $22,000

Desired reserves is $ 6,250

Excess reserves is $15,750

The maximum amount of new loans the bank may make =$15,750. The new balance sheet is illustrated in column 1 above.

 

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