Question
Modern Bank plans to launch a new deposit campaign next week in hopes of bringing in from $400 million to $900 million in new deposit
Modern Bank plans to launch a new deposit campaign next week in hopes of bringing in from $400 million to $900 million in new deposit money, which it expects to invest at a 7.5 percent yield. Modern Bank expects that an offer rate on new deposits of 4.75 percent would attract $400 million in new deposits and rollover funds. To attract $500 million, the bank would probably be forced to offer 5.25 percent. It also forecasts that $600 million might be available at 5.8 percent, $700 million at 6.25 percent, $800 million at 6.5 percent, and $900 million at 7.0 percent. What volume of deposits should the institution try to attract to ensure that marginal cost does not exceed marginal revenue?
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