Inspiration Savings Association is considering funding a package of new loans in the amount of $400 million. Inspiration has projected that it must raise $450 million in order to have $400 million available to make new loans. It expects to raise $325 million of the total by selling time deposits at an average interest rate of 1.75 percent. Noninterest costs from selling time deposits will add an estimated 0.45 percent in operating expenses. Inspiration expects another $125 million to come from noninterest-bearing transaction deposits, whose noninterest costs are expected to be 2.00 percent of the total amount of these deposits. What is the Association’s projected pooled-funds marginal cost? What hurdle rate must it achieve on its earning assets?
Answer to relevant QuestionsWhat services are provided by investment banks (IBs)? Who are their principal clients?How do trust services generate fee income and often deposits as well for banks and other financial institutions offering this service?Based on what you learned from reading this chapter and from studies you uncovered on the Web, which of the financial firms listed below are most likely to benefit from economies of scale or scope and which will probably not ...15-12. A bank reports the following items on its latest balance sheet: allowance for loan and lease losses, $42 million; undivided profits, $81 million; subordinated debt capital, $3 million; common stock and surplus, $27 ...What evidence does recent research provide on the role of the private marketplace in determining capital standards?
Post your question