Question: New Day Bank plans to launch a new deposit campaign
New Day Bank plans to launch a new deposit campaign next week in hopes of bringing in from $100 million to $600 million in new deposit money, which it expects to invest at a 4.25 percent yield. Management believes that an offer rate on new deposits of 2 percent would attract $100 million in new deposits and rollover funds. To attract $200 million, the bank would probably be forced to offer 2.25 percent. New Day’s forecast suggests that $300 million might be available at 2.50 percent, $400 million at 2.75 percent, $500 million at 3.00 percent, and $600 million at 3.25 percent. What volume of deposits should the institution try to attract to ensure that marginal cost does not exceed marginalrevenue?
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