Assume a 100K time deposit in a bank.
Then assume this money is then lent out for twenty mortgages, each 10% less than the last due to the reserve requirement.
Assume each mortgage is a title transfer between two bank customers and held by the same bank.
Total Reserves: $87,842.33
Total Reserves + Last Amount Deposited: 100.00k in the Bank
Total Amount of Deposits: $890,581.01
Total Amount Lent Out: $790,581.01
Total Interest on $790,581.01 for one year at 5% Interest = $39,529.05
$39,529.05 is equal to just under 40% annual interest on 100k deposit.
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October 31, 2011 at 6:28 pm |
We are going to need you to put 20% down