) What is the itnerest elasticity of demand for the pans? ) What is the unemployment elasticity of demand or loans? DWhat is the cost function?

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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The bank has a montly fixed cost of $10,000 plus
an annual variable cost (interest paid on depsoits
plus various admin fees equal to 5% of the loans
created. Each loan is $100,000, 30 year fixed APR
mortgage, and the unemployment rate is 5%.
Q = 125-624ir +0.26F- 90.4U
a) What is the bank's annual profits from this
portfolio?
b) What is the itnerest elasticity of demand for the
loans?
c) What is the unemployment elasticity of demand
for loans?
d)What is the cost function?
Transcribed Image Text:The bank has a montly fixed cost of $10,000 plus an annual variable cost (interest paid on depsoits plus various admin fees equal to 5% of the loans created. Each loan is $100,000, 30 year fixed APR mortgage, and the unemployment rate is 5%. Q = 125-624ir +0.26F- 90.4U a) What is the bank's annual profits from this portfolio? b) What is the itnerest elasticity of demand for the loans? c) What is the unemployment elasticity of demand for loans? d)What is the cost function?
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