A bank is projecting a decline in deposits of $10 over the course of the next six
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Question:
A bank is projecting a decline in deposits of $10 over the course of the next six months.
Currently they pay 4% on deposits, earn 7% on loans. The cost of new debt is 7.5%.
What is the bank’s financing gap?
What is the cost of addressing this decline of deposits using stored liquidity?
Purchased liquidity?
Which method should the bank choose?
Related Book For
Finance Applications and Theory
ISBN: 978-0077861681
3rd edition
Authors: Marcia Cornett, Troy Adair
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