Actions:
(1) Investor withdraws Citi deposit, buys Belgian CD.
(2) Belgian Bank loans to Alum. Frames Co.
(3) Al. Frames Co. repays loan with interest.
(4) CD matures, Belgian Bank repays principal & interest, Investor receives proceeds and returns original deposit amount to Citi.

A British investor withdraws her million-dollar deposit from Citicorp Bank, N.A. and converts the deposit into a dollar-denominated, 30-day CD in a Belgian commercial bank at the going market rate (LIBOR) of 5.85 percent. Almost immediately, the Belgian bank makes a loan of $750,000 to an aluminum frames manufacturer at LIBOR plus 30 basis points for 21 days. When the CD matures and the deposit is returned to Citicorp, how much in interest income will the depositor receive? How much will the aluminum frame manufacturer pay in total interest expense for its 21-day bank loan? Please show the proper accounting entries for all of the foregoing transactions (including the return of funds to the original depositor).
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Question

Actions:
(1) Investor withdraws Citi deposit, buys Belgian CD.
(2) Belgian Bank loans to Alum. Frames Co.
(3) Al. Frames Co. repays loan with interest.
(4) CD matures, Belgian Bank repays principal & interest, Investor receives proceeds and returns original deposit amount to Citi.

A British investor withdraws her million-dollar deposit from Citicorp Bank, N.A. and converts the deposit into a dollar-denominated, 30-day CD in a Belgian commercial bank at the going market rate (LIBOR) of 5.85 percent. Almost immediately, the Belgian bank makes a loan of $750,000 to an aluminum frames manufacturer at LIBOR plus 30 basis points for 21 days. When the CD matures and the deposit is returned to Citicorp, how much in interest income will the depositor receive? How much will the aluminum frame manufacturer pay in total interest expense for its 21-day bank loan? Please show the proper accounting entries for all of the foregoing transactions (including the return of funds to the original depositor).
?

Quizplus · Accepted Answer

The Answer of Actions:
(1) Investor withdraws Citi deposit, buys Belgian CD.
(2) Belgian Bank loans to Alum. Frames Co.
(3) Al. Frames Co. repays loan with interest.
(4) CD matures, Belgian Bank repays principal & interest, Investor receives proceeds and returns original deposit amount to Citi.

A British investor withdraws her million-dollar deposit from Citicorp Bank, N.A. and converts the deposit into a dollar-denominated, 30-day CD in a Belgian commercial bank at the going market rate (LIBOR) of 5.85 percent. Almost immediately, the Belgian bank makes a loan of $750,000 to an aluminum frames manufacturer at LIBOR plus 30 basis points for 21 days. When the CD matures and the deposit is returned to Citicorp, how much in interest income will the depositor receive? How much will the aluminum frame manufacturer pay in total interest expense for its 21-day bank loan? Please show the proper accounting entries for all of the foregoing transactions (including the return of funds to the original depositor).
?

Actions: (1) Investor Withdraws Citi Deposit, Buys Belgian CD