What is the net cost of an average demand deposit

Assignment Help Financial Management

Reference no: EM131935961

There are two companies, Company A with a high credit risk and Company B with a low credit risk, are considering an interest rate swap. Each can borrow at the following rates. Company A Fixed Rate 8%, Variable Rate 5%. Company B Fixed Rate 12%, Variable Rate 7%. An interest swap would be beneficial to both parties if:

Company A wants to borrow at the fixed rate and the HCR firm wants to borrow at the variable rate

Company B wants to borrow at the fixed rate and the LCR firm wants to borrow at the variable rate

Both firms want to borrow at the variable rate.

None of the above

2. A bank estimates that their average balance on demand deposit accounts is $2,000, net of float. Each account costs the bank $150 per year in processing costs. The bank collects an average of $7.50 per month on each account for service charges. Assume reserve requirements are 10% What is the net cost of an average demand deposit?

3.0%

3.3%

3.6%

3.9%

Reference no: EM131935961

Questions Cloud

Discuss the overall risk management strategy : Identify the method for your project: agile or waterfall. Discuss why you chose this method. Discuss the overall risk management strategy for your project.

What do you think were the most difficult problems facing us : What do you think were the most difficult problems facing the United States and the FDR Administration in the 1930s?

Application for estimating horizon value of business : Explain the formula to your answer and its application for estimating horizon value of business.

Create a class name horse that contains a data field : Create a class name Horse that contains a data field for name, color, and birth year. Include get and set methods for these fields.

What is the net cost of an average demand deposit : The bank collects an average of $7.50 per month on each account for service charges. What is the net cost of an average demand deposit?

Evaluate the role of transformational leadership : Evaluate the role and effectiveness of transformational and transactional leadership in the organization. Support your (claims, points?) with examples (from?)

What is the purpose of your business : The Business Plan, centered on a business of your choosing, provides the vehicle for this demonstration.

Describe the purpose of the group by clause : Describe the purpose of the GROUP BY clause. Why must the attribute in the GROUP BY clause also appear in the SELECT clause?

What do new york conspiracy trial reveal about race relation : What do the New York Conspiracy Trials reveal about race relations and the legal system in 18`h-century America? Students cannot use outside sources.

User Account

All Pages