Question

Terp Bank obtains a relatively large portion of its funds from conventional demand deposits as it creates many branches with many employees to attract demand deposits. Its interest expenses should be relatively ____, while its noninterest expenses should be relatively ____.
a. high; low

b. low; high

c. high; high

d. low; low

e. none of the above

Answer 1

Terp Bank obtains a relatively large portion of its funds from conventional demand deposits as it creates many branches with many employees to attract demand deposits. Its interest expenses should be relatively low while its noninterest; expenses should be relatively high.

Option B

Explanation:

A withdrawal deposit is a banking or any other financial institution balance whereby the depositor may, without any notice or notification, remove the deposited funds from those in the account within seven days.

An example of demand deposits is checking accounts. We require the depositor to withdraw money at any moment. The volume of transactions a creditor is allowed on these transactions is infinite (even though each transaction might be paid by a bank).

For buyers, deposits of demand are essential because sometimes they house funds for daily expenses. Under no scenario, depositors could not purchase items on-demand without informing the bank first.