Hello, I hope someone can help me with the question below, since I am completely stuck.
One day, a bank receives $5000 deposit on which they are going to pay 2% per year.
Same day, a student wants to take out a loan of $5000. The bank tells them that it costs $100 to process the loan in terms of service, time taken, cost of sending out monthly statements. The student wants to repay the loan in a year. What is the minimum interest rate the bank must charge the student to break even on this transaction?
So I tried using the Break even point equation, but I am confused as to what the variable cost is. E.g.
BEP = Fixed Cost/ (Price- Variable Cost)
I am so confused. Any help is appreciated.