On the 30th of September 2020, Dhaka Bank is attempting to determine its liquidity requirements based on the structure of funds approach for the coming month of October 2020. The management has decided to hold 90 percent reserve in liquid assets for each dollar of hot money deposit, 25 percent reserves for vulnerable fund deposits, and 10 percent for its holdings of stable funds. Dhaka Bank currently has a total loan outstanding of $2,500 million which is expected to experience a growth of 12% in the coming month. Hot Money Deposits Vulnerable Funds Stable Funds Demand Deposits $50m $40m $20m Saving Deposits $15m $20m $30m Fixed Deposits $20m $10m $80m
Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
On the 30th of September 2020, Dhaka Bank is attempting to determine its liquidity requirements based on the structure of funds approach for the coming month of October 2020. The management has decided to hold 90 percent reserve in liquid assets for each dollar of hot money deposit, 25 percent reserves for vulnerable fund deposits, and 10 percent for its holdings of stable funds.
Dhaka Bank currently has a total loan outstanding of $2,500 million which is expected to experience a growth of 12% in the coming month.
|
|
Hot Money Deposits |
Vulnerable Funds |
Stable Funds |
|
Demand Deposits |
$50m |
$40m |
$20m |
|
Saving Deposits |
$15m |
$20m |
$30m |
|
Fixed Deposits |
$20m |
$10m |
$80m |
Assuming that the reserve requirement is 7 percent on all deposit accounts except fixed deposit accounts, find the amount in liquid reserves to be held by Dhaka Bank in order to meet the liquidity requirements for the month of October.
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