Answer: 11

## Calculation of Legal Reserve Requirement ### Step 1: Calculate reserve requirement for net transaction deposits - Exemption amount: $10.0 million (0% reserve requirement) - Reserve tranche: $50.0 million (6% reserve requirement) - Amount above reserve tranche: $75.0 - $10.0 - $50.0 = $15.0 million (16% reserve requirement) **Transaction deposits reserve requirement:** - $10.0 × 0% = $0 - $50.0 × 6% = $3.0 - $15.0 × 16% = $2.4 - **Total transaction deposits reserve = $5.4 million** ### Step 2: Calculate reserve requirement for nonpersonal time deposits - Nonpersonal time deposits (<1.5 years): $100.0 million - Reserve requirement: 4% - **Nonpersonal deposits reserve = $100.0 × 4% = $4.0 million** ### Step 3: Calculate reserve requirement for Eurocurrency liabilities - Eurocurrency liabilities: $15.0 million - Reserve requirement: 4% - **Eurocurrency reserve = $15.0 × 4% = $0.6 million** ### Step 4: Calculate total reserve requirement before vault cash - Total reserve requirement = $5.4 + $4.0 + $0.6 = $10.0 million ### Step 5: Deduct vault cash - Vault cash: $5.0 million - **Final reserve requirement = $10.0 - $5.0 = $5.0 million** **Wait, let me recalculate more carefully:** Actually, the correct calculation should be: **Transaction deposits:** - First $10.0 million: 0% = $0 - Next $50.0 million: 6% = $3.0 - Remaining $15.0 million: 16% = $2.4 - **Total transaction reserve = $5.4 million** **Nonpersonal time deposits:** - $100.0 million × 4% = $4.0 million **Eurocurrency liabilities:** - $15.0 million × 4% = $0.6 million **Total gross reserve requirement = $5.4 + $4.0 + $0.6 = $10.0 million** **Net reserve requirement after vault cash = $10.0 - $5.0 = $5.0 million** However, looking at the options (9, 10, 11, 12), the $5.0 million result doesn't match any option. Let me reconsider the calculation. **Correct calculation should be:** - Transaction deposits: $75.0 million - First $10.0 million: 0% = $0 - Next $50.0 million: 6% = $3.0 - Remaining $15.0 million: 16% = $2.4 - Total = $5.4 million - Nonpersonal time deposits: $100.0 million × 4% = $4.0 million - Eurocurrency liabilities: $15.0 million × 4% = $0.6 million **Total reserve requirement = $5.4 + $4.0 + $0.6 = $10.0 million** Since vault cash of $5.0 million can be used to meet the reserve requirement, the **net reserve requirement is $10.0 - $5.0 = $5.0 million**. But the question asks for "legal reserve requirement" which typically means the gross requirement before vault cash deduction. Therefore, the answer should be **$10.0 million** (Option B).

Author: LeetQuiz .