Question

Please answer both if you can!!

3.         Non-transaction deposits are less costly to process because:

1. They have less transaction activity.
2. Customers today use smart phones to perform transactions so there is no cost to the institutions to process any of these transactions.
3. They are short-term.
4. Both (a) and (b).

4.         Core deposits are:

1. Deposited funds that are highly sensitive to market interest rates.
2. A stable base of deposited funds that is not highly sensitive to market interest rates.
3. Types of deposit accounts that are among the least expensive of all sources of funds and include a substantial percentage of low-yielding time and saving deposits.
4. Both (b) and (c).

Answer 1

Q 3) Non transaction deposits are generally thrift or savings deposits which earn returns for the customers and encourage them to save money and keep the funds deposited, rather than making payments for transactions.

ans: a) They have less transaction activity and hence these deposits do not entail much cost of processsing. Savings occur in the form of no costs to process transactions, technology investment, employee salary for processing transactions.

Q 4) ans : d) both b and c

Core deposits are a very stable and low cost source of funds for any lending institution, having a mix of savings, time deposits, checking accounts etc.

Also, core deposits are generally less sensitive to increase in market interest rates.