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3) Bank of America has $2 million of extra cash at the Federal Reserve Bank of Chicago

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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?