A Bank Has $500 Million in Checking Deposits with Interest

question 73

Multiple Choice

A bank has $500 million in checking deposits with interest and non-interest costs of 6%,$250 million in savings and time deposits with interest and non-interest costs of 14%,and $250 million in equity capital with a cost of 25%.The bank has estimated that reserve requirements,deposit insurance fees and uncollected balances reduce the amount of money available on checking deposits by 15% and on savings and time deposits by 4%.What is the bank's before-tax cost of funds?

• A)15.00%
• B)12.75%
• C)13.29%
• D)15.74%
• E)None of the options is correct

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