Suppose Big Bank offers an interest rate of $6\mathrm{.}0\%$ on both savings and loans, and Bank Enn offers an interest rate of $6\mathrm{.}5\%$ on both savings and loans.

a$.$ What profit opportunity is available?

b$.$ Which bank would experience a surge in the demand for loans? Which bank would receive a surge in deposits?

c$.$ What would you expect to happen to the interest rates the two banks are offering?

a$.$ What profit opportunity is available?

A$.$ Take a loan from Big Bank at $6\mathrm{.}5\%$ and save the money in Big Bank at $6\mathrm{.}0\%.$

B$.$ Take a loan from Big Bank at $6\mathrm{.}0\%$ and save the money in Bank Enn at $6\mathrm{.}5\%.$

C$.$ Take a loan from Bank Enn at $6\mathrm{.}5\%$ and save the money in Big Bank at $6\mathrm{.}0\%.$

D$.$ Save at both banks.

b$.$ Which bank would experience a surge in the demand for loans? Which bank would receive a surge in deposits?

A$.$ Big Bank would experience a surge in deposits, while Bank Enn would receive a surge in loans.

B$.$ Big Bank would experience a surge in the demand for loans, as will Bank Enn.

C$.$ Big Bank would experience a surge in the demand for loans, while Bank Enn would receive a surge in deposits.

D$.$ Big Bank would experience a surge in the demand for deposits, as will Bank Enn.

c$.$ What would you expect to happen to the interest rates the two banks are offering?

A$.$ Big Bank would increase its interest rate and Bank Enn would decrease its rate.