Suppose Bank One offers an interest rate of 8.5% on both savings and loans and Bank Two offers an interest rate of 9.0%

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Suppose Bank One Offers An Interest Rate Of 8 5 On Both Savings And Loans And Bank Two Offers An Interest Rate Of 9 0 1 (71.47 KiB) Viewed 109 times

Suppose Bank One offers an interest rate of 8.5% on both savings and loans and Bank Two offers an interest rate of 9.0% on both savings and loans a. What arbitrage opportunity is available? b. Which bank would experience a surge in demand for loans? Which bank would receive a surge in deposits? c. What would you expect to happen to the interest rates the two banks are offering? a. What arbitrage opportunity is available? a O A. Take a loan from Bank One at 9.0% and save the money in Bank One at 8.5%. OB. Take a loan from Bank One at 8.5% and save the money in Bank Two at 90%. O C. Take a loan from Bank Two at 9.0% and save the money in Bank One at 8.5%. O D. Save at both banks. b. Which bank would experience a surge in demand for loans? Which bank would receive a surge in deposits? O A. Bank One would experience a surge in deposits, while Bank Two would receive a surge in loans O B. Bank One would experience a surge in the demand for loans, as would Bank Two. O C. Bank One would experience a surge in the demand for loans, while Bank Two would receive a surge in deposits OD. Bank One would experience a surge in the demand for deposits, as would Bank Two. c. What would you expect to happen to the interest rates the two banks are offering? O A. Both banks would decrease their interest rates. O B. Both banks would increase their interest rates. O C. Bank One would decrease the interest rate, and Bank Two would increase its rate. OD. Bank One would increase the interest rate, and Bank Two would decrease its rate.