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Hello everyone,
I am confused on how does compensating balance work.
In some of the MCQ for Becker, it usually mentions “cost of funds is x %”.
But what exactly do they mean by “cost of funds”? and how does this apply to compensating balance?
For example, if cost of funds is 10% and the minimum (compensating) balance is 5,000 and you have 0$, it will be a cost of $500?
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