Q:

Solitary Savings Bank received an initial deposit of $2000. It kept a percentage of this money in reserve based on the reserve rate and loaned out the rest. The amount it loaned out was eventually all deposited back into the bank. If this cycle continued indefinitely and eventually the $2000 turned into $40,000, what was the reserve rate?

Accepted Solution

A:
let n be the reserve rate. Then:
2000/n=40000
2000=40000n
n=2000/40000=.05=5% reserve rate
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