Dr. David P Echevarria. All Rights Reserved. 2. BANK PERFORMANCE EVALUATION . Bank ProfitsP = Loans x Realized Loan Yield minus Deposits x Cost per $ of Deposits - Fixed ExpensesRLY = Contractual rate x Good Loan Fraction - (1-Recov. rate) x Bad Loan FractionCost of Deposits = Interest paid plus the cost of free servicesFixed Costs = the cost of everything else the bank needs to run the business.
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