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Homework answers / question archive / 3) Bank of America has $2 million of extra cash at the Federal Reserve Bank of Chicago
3) Bank of America has $2 million of extra cash at the Federal Reserve Bank of Chicago. Chase Bank calls bank of the west asking to borrow the entire amount (usually for a day). Show your working for (a)- (c)
a) If the annual interest rate on federal funds rate is 10%, what is the one-day interest rate on federal funds (approximately)?
b) How many dollars of interest will Bank of America earn for lending this money for one day?]
c) How much interest will Bank of America earn if it lends this amount daily at same rate for the entire year?
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