4. Diamond Pit Savings Association finds that it can attract the following amounts of deposits if it offers new depositors and those rolling over their maturing CDs the inter- est rates indicated below: Expected Volume of New Deposits Rate of Interest Offered Depositors $10 million 15 million 20 million 5.00% 5.25 5.50 5.75 26 million 28 million 6.00 Management anticipates being able to invest any new deposits raised in loans yielding 7 percent. How far should this thrift institution go in raising its deposit interest rate in order to maximize total profits (excluding interest costs)?
4. Diamond Pit Savings Association finds that it can attract the following amounts of deposits if it offers new depositors and those rolling over their maturing CDs the inter- est rates indicated below: Expected Volume of New Deposits Rate of Interest Offered Depositors $10 million 15 million 20 million 5.00% 5.25 5.50 5.75 26 million 28 million 6.00 Management anticipates being able to invest any new deposits raised in loans yielding 7 percent. How far should this thrift institution go in raising its deposit interest rate in order to maximize total profits (excluding interest costs)?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
![4. Diamond Pit Savings Association finds that it can attract the following amounts of
deposits if it offers new depositors and those rolling over their maturing CDs the inter-
est rates indicated below:
Expected Volume
of New Deposits
Rate of Interest
Offered Depositors
$10 million
15 million
5.00%
5.25
20 million
5.50
5.75
6.00
26 million
28 million
Management anticipates being able to invest any new deposits raised in loans yielding
7 percent. How far should this thrift institution go in raising its deposit interest rate in
order to maximize total profits (excluding interest costs)?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8d8900b6-dbf8-4b89-8229-6df397171feb%2F0d45f16a-3942-42a9-a6eb-2b26234613df%2F1nvbz79_processed.jpeg&w=3840&q=75)
Transcribed Image Text:4. Diamond Pit Savings Association finds that it can attract the following amounts of
deposits if it offers new depositors and those rolling over their maturing CDs the inter-
est rates indicated below:
Expected Volume
of New Deposits
Rate of Interest
Offered Depositors
$10 million
15 million
5.00%
5.25
20 million
5.50
5.75
6.00
26 million
28 million
Management anticipates being able to invest any new deposits raised in loans yielding
7 percent. How far should this thrift institution go in raising its deposit interest rate in
order to maximize total profits (excluding interest costs)?
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