Imagine that big bank has a 5% reserve requirement and $7,000 in deposits. if this bank has loaned out all it can given the reserve requirement, which of the following statements is correct?

a. big bank has $35 in reserves and $4,500 in loans
b. big bank has $250 in reserves and $4,750 in loans.
c. big bank has $350 in reserves and $6,650 in loans.
d. none of the above statements is correct

C. Big Bank has $350 in reserves and $6,650 in loans.

Explanation:

The computation is shown below:

Since it is given in the question that 5% is the reserve requirement and the remaining amount would be loaned out and the same is applied to the calculation part

For reserves

= Deposit amount × reserve requirement percentage

= $7,000 × 5%

= $350

And, the remaining amount would be reflected in the loan account

= Deposit amount - reserves

= $7,000 - $350

= $6,650

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