A Bank Expects to Raise $30 Million in New Money

Multiple Choice

A bank expects to raise $30 million in new money if it pays a deposit rate of 7%.It can raise $60 million in new money if it pays a deposit rate of 7.5%.It can raise $80 million in new money if it pays a deposit rate of 8% and $100 million in new money if it pays a deposit rate of 8.5%.This bank expects to earn 9% on all money that it receives in new deposits.What is the marginal cost of deposits if this bank raises their deposit rate from 8% to 8.5%?

A) 0.5%
B) 7.5%
C) 8.0%
D) 9.5%
E) 10.5%