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Central Bank plans to launch a new deposit campaign next week in hopes of bringing in from $150 million to $650 million in new deposit
Central Bank plans to launch a new deposit campaign next week in hopes of bringing in from $150 million to $650 million in new deposit money, which It expects to invest at a 11.75 percent yleld. Management belleves that an offer rate on new deposits of 5.75% would attract $150 million in new deposits and rollover funds. To attract $200 million the bank would probably be forced to offer 6.5%. The bank forecasts suggest that $350 million might be available at 7%, $475 million at 7.5%, $550 million at 8.5% and $650 million at 9.5 %. What volume of deposits should the bank try to attract to ensure that marginal cost does not exceed marginal revenue? (12 marks)
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