13-102 What Is the Expected Return on the Loan to the Bank

question 15

Multiple Choice

13-102 What is the expected return on the loan to the bank if 50 percent of the loan is drawn and there are no reserve requirements on demand deposits? Do not take future values of fees or interest income received.

• A)13.45 percent.
• B)13.57 percent.
• C)13.60 percent.
• D)13.72 percent.
• E)13.90 percent.

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Definitions:

Income Statement

A financial report that shows a company's revenues, expenses, and net income over a specific period, highlighting its operating performance.

Equity Method

An accounting technique used for recording investments in other companies, where the investment is initially recorded at cost and adjusted for the investor's share of the investee's profits or losses.

Cash Dividends

Dividends paid out in cash by a corporation to its shareholders from its earnings.

Exchange Rate

The rate at which one currency can be exchanged for another, often determined by the foreign exchange market.