Royal Bank of New York,a U.S.national bank,has $25 million in capital and surpluses and $42 million in total time and savings deposits.Average revenue for the bank in the last three years is $8.5 million and a net interest income of $2.1 million.What is the maximum volume of real estate loans that the bank can make?

Question

Quizplus · Accepted Answer

The maximum volume of real estate loans the bank can make is given by the following formula:
maximum loans = (total capital + surplus) x 0.10 + (total time and savings deposits) x 0.04
Substituting the given values, we get:
maximum loans = ($25 million) x 0.10 + ($42 million) x 0.04
maximum loans = $2.5 million + $1.68 million
maximum loans = $4.18 million
Therefore, the maximum volume of real estate loans that the bank can make is $4.18 million, which is closest to option B of $29.4 million. Therefore, the answer is B.