A bank’s reserve ratio is 6.5 percent and the bank has $1,950 in reserve. Its deposits amount to $30,000.00.
⇒Amount in reserve/money deposit = reserve ratio
⇒Let money deposit be x,
⇒1950/x = 6.5
⇒1950X6.5/1000
⇒1950/x X 6.5/100 = 0.065
⇒1950/6.5X100= x =30000
The percentage of deposits that a commercial bank must retain in reserve is known as the mandated reserve ratio.
A ratio of a bank's cash held in the Federal Reserve to all of its deposits can be used to represent the required reserve ratio formula.
A bank's reserve ratio, for instance, would be 1/20 or 5 percent if it had $100,000 in deposits and was required to retain $5,000 in the Federal Reserve.
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