Construction loans pay off in 1 year and earn 6 home loans, Financial Management

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Construction loans pay off in 1 year and earn 6 home loans

Construction loans pay off in 1 year and earn 6%. Home loans are long term assets and earn 4%. Demand deposits cost 2%. What is the highest rate the bank can pay on time deposits to achieve the required return of 7% to bank shareholders? A.8.33% B. ?210,000 C. 6.78% D. 5.8% E. 4%

Assets Liabilitites

Construction loans ? 25 Demand deposits 35

Home Loans 75 Time Deposits 62

Totals 100 Equity Capital 3

Total 100

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Financial Management: Construction loans pay off in 1 year and earn 6 home loans

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