Bank of YMM Target Reserve Ratio Calculation

What is the Bank's target reserve ratio?

The Bank of YMM's target reserve ratio is 26%. What does this mean and how is it calculated?

Bank of YMM's Target Reserve Ratio

The Bank of YMM's target reserve ratio is 26%. This means that the bank is required to hold 26% of its deposits as reserves. The target reserve ratio of a bank is the percentage of its deposits that it is required to hold as reserves.

For calculating the target reserve ratio, we divide the target reserves by the deposits. In this case, the Bank of YMM has deposits of $50,000 and target reserves equal to actual reserves of $13,000.

To find the target reserve ratio, we divide the target reserves ($13,000) by the deposits ($50,000):

Target Reserve Ratio = Target Reserves / Deposits

Target Reserve Ratio = $13,000 / $50,000

Simplifying the calculation, we get:

Target Reserve Ratio = 0.26 or 26%

Therefore, the Bank of YMM's target reserve ratio is 26%. This means that the bank is required to hold 26% of its deposits as reserves.

Understanding the target reserve ratio of a bank is essential in analyzing its liquidity and financial stability. By maintaining the required reserves, a bank can ensure it has enough funds to meet withdrawal demands and regulatory requirements.