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About Jim Meadows
Expertise
I can respond to most questions concerning consumer and business relationships with US financial institutions. My expertise touches on deposit and loan issues and particularly on strategies to navigate through bank policies personell and practices. I have a degree in Economics, attended law school, Graduate Shool of Banking, and Commercial Lending and Compliance Schools.

Experience
I have twenty years experience as a bank CEO. Most of those years were spent operating a bank focused primarly on serving consumer/retail needs. I helped pioneer deposit and loan products for low/moderate income individuals. I currently serve on multiple bank boards and am Chairman of a Commercial Bank in Atlanta.

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Using Banks and Bank Accounts - Cost of funds

Expert: Jim Meadows - 10/23/2009

Question
I am part of a financial institution named ABC Bank LTD(name changed. I am allocated a corpus of USD 20 billion which shall come from deposit schemes as follows.
Nature of account        Amount      Rate of interest
Savings Bank account     USD 3bn     4.5%
Current account          USD 5bn     0%
3 months deposit         USD 1bn     3%
6 months deposit         USD 2bn     3.75%
12 months deposit        USD 3bn     4.25%
24 months deposit        USD 2bn     4.75%
36 months deposit        USD 4bn     6%

calculate cost of funds?

Answer
Subi, multiply each deposit category by the annual rate (this will give you the annual interest per deposit. add those seven (this gives you the annual interest cost in USD for total deposits, Add the total amounts on deposit and divide the total annual interest by the total deposits. This will give you the average annual cost of funds(___%) for the portfolio you showed.

Keep in mind that this cost ___% is just a snapshot and reflects annualized costs only that day. Jim

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