Compute the lowest-cost source of funding for glenwood

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Reference no: EM1399351

Glenwood National Bank is short of essential legal reserves. The bank's money manager estimates it will need to raise an additional $50 million in funds to cover its standby requirement over the next three days. Federal funds are transaction today at 5.90 percent and the bank's economist has forecast a federal funds rate of 6.15 percent tomorrow and 6.20 percent the next day. Passable CDs in minimum maturities of seven days have been trading this morning at 5.85 percent with a forecast of 5.90 percent tomorrow as well as 5.98 percent the next day. The FDIC charges 30 cents for $100 for insurance coverage.
Compute the lowest-cost source of funding for Glenwood National Bank as well as the next cheapest source for borrowing over the next three days (today, tomorrow and the next day). What are the relative advantages as well as disadvantages of each of these funding sources?

Reference no: EM1399351

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