Problem
I. Internet banks vs. regular banks
1) How do Internet banks differ from regular banks in regard to the types of services they provide?
2) What are some high-yield savings accounts? Does the higher yield tend to be offered by Internet banks or regular banks? What is the highest yield you find out? What is its compounding frequency?
3) Why do Internet banks offer higher or lower interest rates than regular banks?
II. Spread Effect
Go to the Federal Reserve Bank of St. Louis website and find the information on three-month CD rates (NRC3MCD) versus the bank prime loan rate (MPRIME).
1) How have prime rates and CD rates changed from April 2021 to September 2022, as reported in Figure 23-1 (p701).
2) Calculate the spread between the prime rate and CD rate from April 2021 to September 2022 (show the calculation detail). How has the spread changed over the period?
3) As widely anticipated, the Fed will continue increase the interest rates in the near future, what would be the combined CGAP and spread effect on the NII of commercial banks with positive CGAP? What would be the combined CGAP and spread effect on the NII of commercial banks with negative CGAP? Explain the answers.