Assume That a Bank Receives a $5,000 Deposit from a Customer

question 8

Short Answer

Assume that a bank receives a $5,000 deposit from a customer and lends it to another customer to start a small business. The bank pays a straight 5% per year interest to the customer and charges 10% per year for the loan. Calculate the spread for one year.

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Definitions:

Money Illusion

The tendency of people to think of currency in nominal, rather than real, terms, thereby neglecting the effect of inflation on purchasing power.

Anchoring and Adjustment

A psychological heuristic where initial information serves as a reference point for future decisions and adjustments.

Extended MRP

Manufacturing Resource Planning with additional functionalities that provide a more comprehensive planning system, integrating aspects like project management and finance.

Basic MRP

A simpler version of Material Requirements Planning that focuses on the essential calculations to determine material needs without advanced optimization or capacity planning features.