Scenario 11-1 A Bank's Assets Consist of $500 000 in Total Reserves

Multiple Choice

Scenario 11-1
A bank's assets consist of $500 000 in total reserves, $1 600 000 in loans, and a building worth $1 200 000. Its liabilities and capital consist of $2 000 000 in demand deposits and $1 300 000 in capital.
-Refer to Scenario 11-1.If the desired reserve ratio is 20 percent,what is the level of the bank's excess reserves and how much could it loan out as a result?

A) Excess reserves are $100 000, and it could loan out $400 000.
B) Excess reserves are $400 000, and it could loan out $2 000 000.
C) Excess reserves are $100 000, and it could loan out $100 000.
D) Excess reserves are $400 000, and it could loan out $500 000.