On April 2, 2020, shortly after the $7.5 million deposit outflow, Key Bank had borrowed the needed fund in the fed funds market to cover the shortfall in reserves for the remainder of the month (29 days, from 4/2 to 4/30). The required yield on a discount basis was 1.5%. On April 30, 2020, Key Bank finally received the first required payments from its mortgages, loan, and T-bills, and it also paid off its fed funds loan. Key Bank was required to establish a loan loss reserve at 0.5% of the commercial loan value and the bank was in the 35% tax bracket. The bank had not engaged in any off-balance- sheet activities.
On April 2, 2020, shortly after the $7.5 million deposit outflow, Key Bank had borrowed the needed fund in the fed funds market to cover the shortfall in reserves for the remainder of the month (29 days, from 4/2 to 4/30). The required yield on a discount basis was 1.5%. On April 30, 2020, Key Bank finally received the first required payments from its mortgages, loan, and T-bills, and it also paid off its fed funds loan. Key Bank was required to establish a loan loss reserve at 0.5% of the commercial loan value and the bank was in the 35% tax bracket. The bank had not engaged in any off-balance- sheet activities.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On April 2, 2020, shortly after the $7.5 million deposit outflow, Key Bank had borrowed the needed fund in
the fed funds market to cover the shortfall in reserves for the remainder of the month (29 days, from 4/2 to
4/30). The required yield on a discount basis was 1.5%.
On April 30, 2020, Key Bank finally received the first required payments from its mortgages, loan, and T-bills,
and it also paid off its fed funds loan. Key Bank was required to establish a loan loss reserve at 0.5% of the
commercial loan value and the bank was in the 35% tax bracket. The bank had not engaged in any off-balance-
sheet activities.
Question: What was the bank's net interest margin (NIM) for its first month of operation?
O 0.29%
O 0.37%
O 0.11%
O 0.47%
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