Question

ASSUMPTIONS

Average Ledger Balance $250,000

Deposit Float $ 30,000

Reserve Requirement 5%

Earnings Credit Rate 1%

Service Charges for the Month $1,000

Days in Month 30

Use the data above to calculate the Average Collected Balance.

Use the data above to calculate the Earnings Credit.

Did the company keep sufficient collected balances on deposit to cover the cost of services over the period?

2. A company uses services with charges that total $10,000 per month. The earnings credit rate is 5%. The reserve requirement is 10%. Assuming a 30-day month average collected balances required to compensate the financial institution for the services. What is the collected balance required?

What impact has consolidation and specialization in the financial services industry had on the FSP selection process?

What are RFPs and who uses them?

Why is it important for an organization to monitor bank and FSP service practices and creditworthiness?

What factors are important in long-term relationships?

What is a bank credit card?

Answer 1

What is a bank credit card

It is a line of credit given by bank up to a specified limit and repaid as per the time interval. The best example to understand the scenario is Prepaid bills and Postpaid bills.

What is RFP and who uses it

A request for proposal (RFP) is a document that an organization, often a government agency or large enterprise, posts to elicit a response a formal bid from potential vendors for a desired IT solution. The RFP specifies what the customer is looking for and describes each evaluation criterion on which a vendor's proposal will be assessed.

An RFP may be issued for a number of reasons. In some cases, the complexity of an IT project calls for a formal RFP. An organization can benefit from multiple bidders and perspectives when seeking an integrated solution calling for a mix of technologies, vendors and potential configurations. A business moving from a paper-based system to a computer-based system, for example, might request proposals for all the hardware, software and user training required to establish and integrate the new system into the organization.

Earning Credit from the given assumptions

From given data

Rate of Earning credit is 1%

Average ledger balance = $250000

Earning credit was not considered for deposit float as it is yet to collected so the interest wiil be earned on ledger balance only

i.e., 1%of ($250000) =$2500

Why is it important for an organization to monitor bank and FSP service practices and creditworthiness?

Monitoring ensure that the bank's strategic objectives are being accomplished within the parameters of its risk management

Creditworthiness is a valuation performed by lenders that determines the possibility a borrower may default on his debt obligations.Lending institutions also consider the amount of available assets and the amount of liabilities to determine the probability of a customer's default.

Did the company keep sufficient collected balances on deposit to cover the cost of services over the period?

More information required to answer this query

What impact has consolidation and specialization in the financial services industry had on the FSP selection process?

Consolidation will strengthen the financial institutions and have the more extension of it's services and specialization will provide the area of the expertise and experience in the specified area.

What factors are important in long-term relationships?

Developing solid relationships with customers by giving them direct information that caters to their specific interests and needs.

When a business implements an effective relationship it becomes more profitable

Companies that create complementary offers for their customers further cement their relationship with these individuals.