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A bank has $200 million in checking deposits. Interest and noninterest costs on these accounts are 4%. This bank has $400 million in savings and
A bank has $200 million in checking deposits. Interest and noninterest costs on these accounts are 4%. This bank has $400 million in savings and time deposits with interest and noninterest costs of 8%. This bank has $200 million in equity capital with a cost of 24%. This bank has estimated that reserve requirements, deposit insurance fees and uncollected balances reduce the amount of money available on checking deposits by 10% and on savings and time deposits by 5%. What is this banks before-tax cost of funds?
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