Phil Frugal has been saving his pennies since he was 5 years old. He is now 45 and deposits his savings in a bank. His pennies total $5,000. Using this information and your knowledge of the banking system, choose the best match for each item. Then calculate the values of reserves, required reserves, and excess reserves. Assume a required reserve ratio of 10%.
a. The amount of interest the bank must charge on a loan:
i. required reserves
ii. excess reserves
iii. reserves
iv. none of these
b. The amount of funds banks must, by law, hold in:
i. reserve
ii. required reserves
iii. excess reserves
iv. none of these