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Question
A bank has $500 million in checking deposits with interest and non-interest costs of 6%, $250 million in savings and time deposits with interest and non-interest costs of 14%, and $250 million in equity capital with a cost of 25%. The bank has estimated that reserve requirements, deposit insurance fees and uncollected balances reduce the amount of money available on checking deposits by 15% and on savings and time deposits by 4%. What is the bank's before-tax cost of funds?
A. 15.00%
B. 12.75%
C. 13.29%
D. 15.74%
E. None of the options is correct
Answer
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