Bank T generally obtains a high percentage of its funds from negotiable certificates of deposit (NCDs). Bank V obtains most of its funds from retail CDs. Bank Z obtains its funds from checking accounts. The bank that will likely incur the highest interest expense is ____.
A)Bank T
B)Bank V
C)Bank Z
D)All three banks are the same

Question

Quizplus · Accepted Answer

Bank T, which relies heavily on negotiable certificates of deposit (NCDs), will likely incur the highest interest expense. NCDs are typically issued in the money market and offer higher interest rates to attract investors, compared to retail CDs and checking accounts which generally offer lower interest rates.

Bank T Generally Obtains a High Percentage of Its Funds