&A commercial building:The actual market lease rate of the space.
&A piece of equipment:The market rental value, in dollars per day.
&Abusiness:Theleaserateanowneriswillingtoleaseitforinthe
market.This rate is used to calculate the rate of return on investment, because
RF bankersdo not rent money—in fact, they invest with and in the cus-
tomer. If the rate of return is higher than the target return for the institution
(which is the return expected in the market from shareholders and deposi-
tors), then it makes sense to finance/invest with the customer. If the return is
lower, then it does not make sense to finance/invest, and the application is
declined. This rejection is applied even if the customer has fulfilled all stan-
dard banking requirements from the creditworthiness test, the appraisal
test, and the capacity for servicing the financing obligation. We will discuss
this process in more detail in Chapters 10 and 13, and examples will be
given.
NOTES
- Davies, Glyn,A History of Money from Ancient Times to the Present Day, 3rd.
ed. Cardiff: University of Wales Press, 2002. - J. Laurence, The History of Bimetallism in the United States, Chap. 8,
D. Appleton and Company, 1901. - David H. Friedman,Essentials of Banking, American Bankers Association,
1989. - These are episodes of irrational public hoarding and runs on banks.
- Based on David H. Friedman,Essentials of Banking, American Bankers Associ-
ation, 1989. - Yahia Abdul-Rahman,LARIBA Bank, Islamic Banking, Foundation for a
United and Prosperous Community, 1994. Published by the author. - Ibid.
- David H. Friedman,Essentials of Banking, American Bankers Association,
1989. - Ibid.
- This section is based on a comprehensive review of history as outlined by Jude
Wanniski,The Way the World Works, Touchstone/Simon and Schuster, 1978. - A short history of modern finance, The Economist, October 16, 2008,
pp. 79–81. - Professor John Taylor, Stanford University. Please Visit Professor Taylor’s Per-
sonal Home Page http://www.stanford.edu/johntayl/. - Richard A. Brealey and Steward C. Meyer,Principles of Corporate Finance, 6th
ed. Irwin McGraw-Hill, London, 2000, p. 49.
Money and Its Creation 129