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A bank receives a demand deposit of $10,000. The bank is now in a position to extend additional loans of $8,000. What is the legal reserve requirement

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abiolataiwo2015

If the bank is now in a position to extend additional loans of $8,000. The legal reserve requirement is: 20 percent.

Legal reserve requirement

Using this formula

Legal reserve requirement=( Demand deposit -Additional loans/Demand deposit

Let plug in the formula

legal reserve requirement=($10,000-$8,000)/$10,000

Legal reserve requirement=$2,000/$10,000×100

legal reserve requirement=20%

Therefore the legal reserve requirement is: 20 percent.

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