Given the Following Marginal Cost Estimates Associated with Obtaining Additional

question 26

Multiple Choice

Given the following marginal cost estimates associated with obtaining additional interest-checking account funding: Market interest rate 0.3%,
Servicing costs: 2.6% of balances
Acquisition costs: 0.2% of balances
Deposit insurance costs = 0.25% of balances
Net investable balance = 85% (10% required reserves and 5% float)
What is the estimated marginal cost of obtaining additional interest-checking balances?

• A) 2.85%
• B) 3.35%
• C) 3.53%
• D) 3.72%
• E) 3.94%

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Definitions:

Orphan

A child who has lost both parents through death or, in some definitions, a child who has lost one parent.

Account Penetration

The process of deepening relationships with existing customers by selling more products or services.

Transactional Relationship

A business relationship focused primarily on the exchange of goods or services for payment, with little personal connection.

Distinct Component

a unique and identifiable part of a larger system or product, which serves a specific function and is often necessary for the overall operation or effectiveness.