Question

Assuming simple interest, if a company called TMW deposits $10,000 for 1 year and the financial institution immediately loans the money to a sister company for 1 year, how much more will the institution net over the year on that $10,000 at a rate of 0.15% APY for amounts from $0-$999 and at %0.30 APY over $1000 at a prime of +5.75%.

Answer 1

The financial institution receives a deposit of $10000 and immediately loans it to another company.

So the net benefit to the institution over the year will be the difference in yields of lending and deposit.

the benefit the institution receives is:

0.15% on $999 i.e $999 * 0.15% = $1.4985

0.30% on $9001 i.e. $9001 * 0.15% = $ 27.003

total benefit is $1.4985 + $ 27.003 = $28.5015

So, the net benefit for the institution over the year will be $ 28.5015.