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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