Question

    Net Interest Margin is a key profitability metric for

    banks. How is it best described?
    A The difference between interest earned on securities and interest paid on deposits. Correct Answer Incorrect Answer
    B The ratio of net income to total assets. Correct Answer Incorrect Answer
    C The spread between lending rates and the cost of funding. Correct Answer Incorrect Answer
    D The percentage of interest income that is generated from loan-related fees. Correct Answer Incorrect Answer
    E The comparison between the bank's investment returns and its interest expenses. Correct Answer Incorrect Answer

    Solution

    The difference between the interest earned (on loans given by bank and on investments) and the interest paid (on deposits and borrowings) is the net interest income of the bank.

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