Giant National Bank plans to launch a new deposit campaign next week in hopes of bringing in from $250 million to $500 million in new deposit money, which it expects to invest at 9.75% yield. Management believes that an offer rate on new deposits of 5.25% would attract $250 million in new deposits and roll over funds. To attract $300 million, the bank would probably be forced to offer 5.85 percent. Giant’s forecast suggests that $350 million might be available at 6.25%, $400 million at 6.75%, $450 million at 7.45% and $500 million at 7.85%. How far should this bank go in raising its deposit rate in order to maximize total profit?

Answer rating: 100% (QA)

To determine how far Giant National Bank should go in raising its deposit rate to maximize total profit we need to calculate the profit generated from ... View the full answer