Homework Answers
1 If bank pays 3 % interest on savings, then it will charge above 3% to loan money to people. The spread between what it pays to depositors and charge interest to borrowers is net interest margin for bank. For example the bank will charge 5-6% for the loan to borrowers to make profit in banking business
2 Diversification is a strategy in which the investment or exposure is spread to different markets to limit the exposure of high risk in single market or geographical area. The rationale diversification is that the portfolio of different kinds of assets aims to generate higher return and lower the risk of any individual holding or security.
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If a bank pays 3% interest on savings, how much interest will it charge for loans...
Old Time Savings Bank pays 3% interest on its savings accounts. If you deposit $3,000 in...
Old Time Savings Bank pays 3% interest on its savings accounts. If you deposit $3,000 in the bank and leave it there: (Do not round intermediate calculations. Round your answers to 2 decimal places. a. How much interest will you earn in the first year? First year interest b. How much interest will you earn in the second year? Second year interes c. How much interest will you earn in the 10th year? Tenth year interest
The local bank pays 5% interest on savings deposits. In a nearby town, the bank pays...
The local bank pays 5% interest on savings deposits. In a nearby town, the bank pays 1.25% per quarter. A man who has $4000 to deposit wonders whether the higher interest paid in the nearby town justifies driving there. If all money is left in the account for 3 years, how much interest would he obtain from the out-of-town bank?
Old Time Savings Bank pays 4% interest on its savings accounts. If you deposit $1,000 in...
Old Time Savings Bank pays 4% interest on its savings accounts. If you deposit $1,000 in the bank and leave it there: (Do not round intermediate calculations. Round your answers to 2 decimal places.) a. How much interest will you earn in the second year? b. How much interest will you earn in the 10th year?
You deposit $1,900 in your bank account. If the bank pays 4% simple interest, how much...
You deposit $1,900 in your bank account. If the bank pays 4% simple interest, how much will you accumulate in your account after 10 years? Future value $ b. What if the bank pays compound interest (annually)? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Compound interest $ c. How much of your earnings will be interest on interest? (Round your answer to 2 decimal places.) Interest on interest $
Suppose that bank AAA offers an interest rate of 6.5% on both savings and loans, and...
Suppose that bank AAA offers an interest rate of 6.5% on both savings and loans, and another bank, Bank BBB, offers an interest rate of 8.3% on both savings and loans. What profit opportunity is available? Which bank would experience a surge in the demand for loans? Which bank would receive a surge in deposits? What would you expect to happen to the interest rates the two banks are offering?
A bank is offering 4% interest on loans and 3% on savings. If you are getting...
A bank is offering 4% interest on loans and 3% on savings. If you are getting a loan, which compounding do you prefer? Monthly Continuously Annually Semiannually
First City Bank pays 6 percent simple interest on its savings account balances
First City Bank pays 6 percent simple interest on its savings account balances, whereas Second City Bank pays 6 percent interest compounded annually.If you made a $ 57,000 deposit in each bank, how much more money would you earn from your Second City Bank account at the end of 10 years? (Do not round intermediate calculations and round your answer 10 2 decimal places, e.g., 32.16.Difference in accounts = $_______
4) interest questions: (10 pts total) How much will be in your bank account at the...
4) interest questions: (10 pts total) How much will be in your bank account at the end of five years if you invest $5,000 now at 12% per annum, compounded annually? (1 pts) And what if the interest rate is 12% per annum, but compounded monthly? (1 pts) If you invest your $5,000 and want to have $10,000 in five years' time, what is the minimum yearly interest rate that will ensure that you have at least this much when...
First City Bank pays 9 percent simple interest on its savings account balances, whereas Second City...
First City Bank pays 9 percent simple interest on its savings account balances, whereas Second City Bank pays 9 percent interest compounded annually. If you made a deposit of $7,500 in each bank, how much more money would you earn from your Second City Bank account at the end of eight years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)diffence in accounts?
Assume you opened and deposited $1000.00 into a savings account that pays 4% per annum. If the bank compounds interest...
Assume you opened and deposited $1000.00 into a savings account that pays 4% per annum. If the bank compounds interest annually, how much will you have in your account at the end of 3 years (assuming no deposits or withdrawals are made for 3 years)? Find the balance if the bank compounds interest quarterly under the same conditions. Find the balance if the bank compounds interest continuously under the same conditions.
Old Time Savings Bank pays 3% interest on its savings accounts. If you deposit $3,000 in the bank and leave it there: (Do not round intermediate calculations. Round your answers to 2 decimal places. a. How much interest will you earn in the first year? First year interest b. How much interest will you earn in the second year? Second year interes c. How much interest will you earn in the 10th year? Tenth year interest
4) interest questions: (10 pts total) How much will be in your bank account at the end of five years if you invest $5,000 now at 12% per annum, compounded annually? (1 pts) And what if the interest rate is 12% per annum, but compounded monthly? (1 pts) If you invest your $5,000 and want to have $10,000 in five years' time, what is the minimum yearly interest rate that will ensure that you have at least this much when...
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