If a bank has actual reserves of $40,000 and a 20 percent reserve requirement, then the maximum amount of checkable deposits the bank can have if excess reserves are zero is:

$200,000

Explanation:

Reserve requirement of a bank is the ratio of the bank's deposits that must be reserved with the closest Federal reserve bank. This is a regulatory requirement that is aimed at preventing failure of financial institutions.

The reserve kept by banks will be a final source of funds to settle it's liabilities to customers incase of failure.

In this instance the required reserve is 20% of customer deposit and this is equivalent of $40,000.

To get the customer deposit that will give this reserve.

20%= $40,000

100%= Customer deposit

Cross-multiply

Customer deposit= (100* 40,000)/20= $200,000

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