A Bank Has Determined That Its Marginal Cost of Raising

question 42

Multiple Choice

A bank has determined that its marginal cost of raising funds is 4.5 percent and that its nonfunds costs to the bank are 0.5 percent.It has also determined that its margin to compensate the bank for default risk for a particular customer is .30 percent.It has also determined that it wants to have a profit margin of .3 percent.What business loan model is this bank using to price the loan for this customer?

• A)The cost-plus loan pricing method
• B)The price leadership model
• C)The below-prime rate pricing model
• D)Customer profitability analysis
• E)None of the options is correct.

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Definitions:

Trust

The firm belief in the reliability, truth, ability, or strength of someone or something, often considered foundational in relationships and societal interactions.

Leptin

A hormone produced by fat cells that helps to regulate energy balance by inhibiting hunger, thereby influencing body weight and appetite.

Appetite Regulation

The physiological and psychological processes that control the desire to eat, influenced by hormonal signals, brain pathways, and external factors like stress.

Intrinsic Motivation

The pursuit of an activity for its own sake.