Question

Consider the following information about a bank. Item Total interest expenses 12 Total non-interest expenses 5 Total interest income 16 Total nom-interest income 2 Total assets 480 Earning base 85% Interest bearing liabilities 75% of Assets Determine this bank's net interest and noninterest margins and its earnings spread.

Answer 1

To determine the net interest margin, subtract the total interest expenses from the total interest income. To calculate the noninterest margin, subtract the total non-interest expenses from the total non-interest income. The earnings spread can be calculated by subtracting the interest expenses from the interest income.

Step-by-step explanation:

To determine the net interest margin, subtract the total interest expenses from the total interest income. In this case, the net interest margin would be 16 - 12 = 4. To calculate the noninterest margin, subtract the total non-interest expenses from the total non-interest income.

In this scenario, the noninterest margin would be 2 - 5 = -3. The earnings spread can be calculated by subtracting the interest expenses from the interest income. Thus, the earnings spread would be 16 - 12 = 4.