Monsu Bank is currently faced with high demand for additional new loans: $40m in household loans, and $20m in business loans. The bank has decided to finance this new pool of loans using the following funding mix: Household loans to be funded by savings deposits (20%), fixed deposits (70%), and equity (10%); Business loans to be funded by fixed deposits (30%), certificates of deposit (55%), and equity (15%). Calculate the pooled marginal cost of funds for the business loan funding mix in percentage terms, given the following information for Monsu Bank: Funding Source Marginal Cost of Funds (per annum) Savings deposits 3% Fixed deposits 7% Certificates of deposit 10% Equity 15%
Monsu Bank is currently faced with high demand for additional new loans: $40m in household loans, and $20m in business loans. The bank has decided to finance this new pool of loans using the following funding mix: Household loans to be funded by savings deposits (20%), fixed deposits (70%), and equity (10%); Business loans to be funded by fixed deposits (30%), certificates of deposit (55%), and equity (15%). Calculate the pooled marginal cost of funds for the business loan funding mix in percentage terms, given the following information for Monsu Bank: Funding Source Marginal Cost of Funds (per annum) Savings deposits 3% Fixed deposits 7% Certificates of deposit 10% Equity 15%
Chapter16: Working Capital Policy And Short-term Financing
Section: Chapter Questions
Problem 26P
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Monsu Bank is currently faced with high demand for additional new loans: $40m in household loans, and $20m in business loans. The bank has decided to finance this new pool of loans using the following funding mix:
- Household loans to be funded by savings deposits (20%), fixed deposits (70%), and equity (10%);
- Business loans to be funded by fixed deposits (30%), certificates of deposit (55%), and equity (15%).
Calculate the pooled marginal cost of funds for the business loan funding mix in percentage terms, given the following information for Monsu Bank:
Funding Source |
Marginal Cost of Funds (per annum) |
Savings deposits |
3% |
Fixed deposits |
7% |
Certificates of deposit |
10% |
Equity |
15% |
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