Chapter 13
Problem 04
Input Area:
Maturity of CD (days) 60
Denomination 5,000,000
Annual yield 2.95%
Output Area:
$ amount of interest paid by bank at maturity $24,583.33
$ amount owed at maturity $5,024,583.33
Chapter 13
Problem 05
Input Area:
$ amount borrowed through a repurchase agreement 125,000,000
Current RP rate 2.50%
maturity (days) 1
Output Area:
$ interest costs $8,680.56
Chapter 13
Problem 06
Input Area:
Cashflows
Deposit inflows 265,000,000
Deposit withdrawals 425,000,000
Estimated new loan demand 400,000,000
Draw-downs on approved credit lines 175,000,000
Securities sold 450,000,000
Securities purchased 60,000,000
Output Area:
Projected funds gap 345,000,000
Chapter 13
Problem 08
Input Area:
$ amount of CD issued 20,000,000
Maturity (days) 90
Annual interest rate 2.75%
Quoted on a bank-year basis (days) 360
Output Area:
$ amount of interest earned 137,500
$ value of CD at maturity 20,137,500
Interest return over a 365 day year (APY) 2.82%
Chapter 13
Problem 09
Input Area:
Sources of funds Interest rates Non-interest costs
Federal Funds 2.25% 0.25%
Negotiable CDs 2.40% 0.25%
Eurodollars 2.30% 0.35%
Commercial Paper 2.35% 0.50%
Fed’s discount rate 2.75% 0.25%
$ amount of funds to be raised 775,000,000
$ amount of funds to be loaned-out 700,000,000
Output Area:
Effective Cost Rate
Federal Funds 2.77%
Negotiable CDs 2.93%
Eurodollars 2.93%
Commercial Paper 3.16%
Fed’s discount rate 3.32%
Chapter 13
Problem 11
Input Area:
Funding Source $ Amount
Int Costs/cost
of equity
Noninterest
Costs
Additional Costs
Checkable Deposits 200,000,000 0.75% 2.00% 0.75%
Time and Savings Deposits 400,000,000 2.50% 0.50% 0.50%
Money Market Borrowings 100,000,000 2.75% 0.25% 0.25%
Shareholders’ Equity 50,000,000 12.00%
Earning assets 700,000,000
Output Area:
Funding Source Total % Costs
$ Interest Costs
$ NI + Add
Costs
Total Funding
Costs
Checkable Deposits 3.50% 1,500,000 5,500,000 7,000,000
Time and Savings Deposits 3.50% 10,000,000 4,000,000 14,000,000
Money Market Borrowings 3.25% 2,750,000 500,000 3,250,000
Total of Funding Sources 750,000,000
Total dollar interest 14,250,000
Total deposits and borrowings 700,000,000
Weighted Average Interest Cost 2.04%
Total funding costs 24,250,000
Break-even cost rate 3.46%
4.03%
Historical wted aver cost of
capital (pre-tax)
Chapter 13
Problem 12
Input Area:
Funding Source $ Amount
Int Costs/cost of
equity
Noninterest Costs
Time Deposits 325,000,000 1.75% 0.45%
Transaction Deposits 125,000,000 2.00%
New Loans 400,000,000
Output Area:
Funding Source Total Costs $ Interest Costs $ Noninterest Cost
Time Deposits 2.20% 5,687,500 1,462,500
Transaction Deposits 2.00% 02,500,000
Total 5,687,500 3,962,500
Funding Source Total 450,000,000
Pooled marginal funds cost 2.14%
Hurdle rate 2.41%