For the following question, assume the following facts:
(1 ) Chase (which is located in the United States) has a 20% reserve requirement imposed by the government.
(2 ) Bank of Germany has no reserve requirements.
(3 ) Both banks may invest at an 8% interest rate.
(4 ) Both banks have fixed costs of $3 per deposit made.
What is the difference between the minimum interest rates each bank can offer and still make a profit if the deposit is $500 for 1 year?
A) 0 - Both banks can offer the same rate.
B) 1%
C) 1.6%
D) 0.4%
E) 20%
C
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