Final answer:
To calculate the forecasted weighted marginal cost of funds for a bank, you need to determine the different funding sources and their associated costs. Core deposits and wholesale liabilities are two main types of funding sources for banks, and they differ in terms of interest elasticity. Core deposits are less sensitive to changes in interest rates, while wholesale liabilities are more responsive to changes in market interest rates.
Step-by-step explanation:
To calculate the forecasted weighted marginal cost of funds for a bank, you need to determine the different funding sources and their associated costs. Table 2 provides this information. To calculate the weighted marginal cost of funds, you multiply the cost of each funding source by its weight, which represents the proportion of funds that come from that source. Then, you sum up these costs to get the overall weighted marginal cost of funds. This calculation helps the bank determine the cost of obtaining funds and manage its financial resources effectively.
Core deposits and wholesale liabilities are two main types of funding sources for banks. Core deposits refer to deposits made by individuals and small businesses that form a stable and long-term source of funding for the bank. These deposits tend to have relatively low interest rates and offer less interest elasticity, meaning they are less sensitive to changes in interest rates. On the other hand, wholesale liabilities include funds obtained from other financial institutions or corporate investors, such as large deposits or issuance of debt securities. These liabilities tend to have higher interest rates and are more interest-elastic, meaning their interest rates are more responsive to changes in market interest rates. Factors that influence the interest elasticity of core deposits and wholesale liabilities include the type of depositor or investor, the maturity of the funding source, and the prevailing interest rate environment.