Question

If a customer deposits $10,000$ into a bank, how much money would the bank be capable of lending to an eligible loan applicant if this bank retains 20 percent of the deposit to cover withdrawals?

Answer 1

Hint: To solve the given question, we need to know all the basics of banks i.e., you must know what is deposit, credit, debit, loan, transaction etc., as here we need to find how much money would the bank be capable of lending to an eligible loan if this bank retains 20 percent of the deposit to cover withdrawals, hence as 20% is given out of $10,000$, hence by this we can find out the money in which bank is able to loan out to the customer.

Complete step-by-step solution:
Let's first talk about banks. While many people believe that banks are in the business of taking customer deposits and paying interest to us for those deposits, nothing could be further from the truth. They do provide this service, but it's so that they can have money to loan out to customers and collect interest from them.
A bank wants to hold onto as little capital as it needs to in order to be able to loan out more money.
In our question, a deposit of $10,000$ has been made. The bank will retain 20%, or
$\Rightarrow 10,000 \times 20% = 10,000 \times \dfrac{{20}}{{100}}$
$\Rightarrow 10,000 \times 20% = 100 \times 20 = 2,000$

Therefore, will be able to loan out $8,000$ as a customer deposits $10,000$ into a bank.

Note: To solve any bank related questions, you must be familiar with all the related terms with respect to the banks and in the given question, we can see that a customer deposits the money and bank retains 20% which involves percentage, hence calculating percentages must be done carefully and retain means when you have a choice, spending the same amount of money on every customer, you spend more on some and less on others.