Fund Transfer Pricing Essay Example | Topics and Well Written Essays - 500 words - 1

Fund Transfer Pricing - Essay Example It is evidently clear from the discussion that commercial banks have two divisions: deposit and lending. The deposit segment accumulates funds from customers. These funds are lent to other customers as loans through the lending division. The interest that banks earn on loans is interest income while interest on deposits is interest expense. The difference between interest income and interest expense is net interest income and is reported on the income statement. It is not a guarantee that all loans are profitable neither do all deposits cause losses. Different deposits have varying values as sources of loans and in the same way, different loans have a varying cost of funding. The main purpose of finance transfer pricing is to measure independently how different sources of funding contribute towards the profitability of banks. Assume a two-year loan financed by a three-month deposit. Assume also that the deposit segment acquires $1,000,000 worth of funds from the customer at a cost of 4%. These funds are passed to the treasury at a funds transfer-pricing rate. Assuming that the rate is 6%, the bank would earn a deposit spread of 2%. The treasury would then pass the funds to the loans department at a funds transfer-pricing rate of 8%. The loans department would then extend the loan to customers at an interest rate of 11%, earning a deposit spread of 3%. On the other side, the treasury would earn a 2% spread for managing the interest rate risk that arises from the mismatch in the maturity of funds. Assigning the funds transfer rate for treasury, the loans and the deposit divisions of the bank decomposes the spread earnings across the three divisions as illustrated in the paper.

Perspectives on the Organizational Buyer Assignment

Perspectives on the Organizational Buyer - Assignment Example It is important for marketers to market their products to large buyers, as they are vital to the business. In addition, geographical concentration has important implications as firms can focus and put more effort in areas that have a high potential of purchasing the company’s products. Moreover, firms should ensure there is distribution of large volumes of products to a huge proportion of customers. The business marketer should as well understand the legal systems and the contractual side of the government. This includes the knowledge of the government requirements for effective negotiations. Some of these contracts include the fixed price profit where there is stability in inflation and costs are controlled. Secondly, the cost reimbursement which works when there is a need for developmental efforts. Marketers should also be aware of available opportunities in institutional markets that include hospitals, universities, and schools (Hutt & Speh, 2008). Finally, they should respond to the distinctive purchasing needs all market segments. Marketing organizations are structured in such a manner that customer markets turn into the centers in which firms are organized. This is the reason why organizations’ marketing efforts focuses on market sectors like the institutions, the governments, and the local and international