1. Banks are required to hold a fraction of demand deposits on reserve. These reserves are mostly held in accounts at the Federal Reserve district banks and pay a small amount of interest to the bank. Suppose the minimum reserve requirement is 5%, so banks must hold at least 5% of total demand deposits in reserve and may lend out the rest. Suppose the interest rates on loans the bank makes is 6% and suppose the interest rate paid on reserves is 1%. Suppose a bank has $10 million in deposits. (a) What is the total amount of interest income that the bank earns if it holds exactly the minimum required amount of deposits in reserve? (b) What is the total amount of interest income that the bank would earn if it did not have to keep any reserves and lent out all of its deposits?