If FNBNA Is Expecting a $20 Million Net Deposit Drain

question 18

Multiple Choice

If FNBNA is expecting a $20 million net deposit drain and the bank wishes to fund the drain by borrowing more money, how much will pre-tax net income change if the borrowing cost is the same as on its existing borrowed funds?

• A) $600,000
• B) -$312,000
• C) -$2,000,000
• D) -$600,000
• E) $312,000 20 million x (4% - 7%) = -$600,000

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Definitions:

Preoccupation with Money

The state of being overly concerned or obsessed with acquiring wealth, often at the expense of other values or aspects of life.

Prohibition

The legal act of prohibiting the manufacture, storage, transportation, and sale of alcohol which was in effect in the United States from 1920 to 1933.

Lax Enforcement

Lax enforcement refers to a situation where rules, laws, or regulations are not strictly applied or are inadequately followed by authorities.

Organized Crime

A category of transnational, national, or local groupings of highly centralized enterprises run by criminals who intend to engage in illegal activity, most commonly for profit.