Question 1:

Answer the next two questions based on the T-account of The First Bank of New Rochelle: (2 points)

The First Bank of New Rochelle

Assets

Liabilities

Reserves$2,000

Deposits$10,000

Loans8,000

1.1. What is the reserve ratio for the First Bank of New Rochelle?

1.2. If $1,000 is deposited into the First Bank of New Rochelle, and the bank loans out the maximum legal amount, illustrate these changes in the T-account for the bank below:

The First Bank of New Rochelle

Assets

Liabilities

Reserves

Deposits

Loans