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Maximum amount of deposits

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Suppose that the first national bank currently holds a total of 34 million dollars in deposits from over 120,000 clients. At the same time, the total amount of loans people owe the bank is 18 million dollars, and the bank cannot legally issue more loans without attracting additional deposits. Assume that the bank currently has 3 million dollars in cash and 1 million dollars worth of securities invested in the financial market. The bank also owns some physical assets, such as its office building.

Suppose now someone saves another $98 into his checking account at the first national bank, what is the maximum amount of deposits that can be generated (including this initial deposit) by the fractional reserve banking system?

Round your answer to 2 digits after the decimal point.

Reference no: EM132422500

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