What is the cost of holding excess reserve

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Reference no: EM132981623

Question: Excess reserves are insurance from deposit outflow. Suppose you hold 15 million required reserves and 45 million excess reserves at the central bank. The total interest payment on reserves from the central bank is 0.3%. If you do not hold your excess reserves at the bank, you may take loans and earn 4% in average. What is the cost of holding excess reserve at the central bank in terms of dollar amount (not in terms of million)?

Round your final answer to two decimals, do not include any commas to separate thousands, and exclude the $ sign. e.g. write $1.25 million as 1250000

Reference no: EM132981623

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