Answered: The net interest margin of a bank is a…

The net interest margin of a bank is a function of A What they pay for wages and the revenue B Their cost of funds and what they earn from giving out loans C

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter14: The Financial Crisis And The Great Recessio

Section: Chapter Questions

Problem 1TY

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Concept explainers

Required Reserve and Excess Reserve Analysis

A required reserve is an amount of cash that banks must keep with themselves, which is certain percentage of the deposits made by their customers. Required reserve is a percentage of the bank's deposits that the respective bank must have on each overnight. The percentage rate is set and determined by the nation’s central bank. It is important to have such funds accumulated to meet its uncertain obligations, sudden liabilities and withdrawals. Required reserve is also known as reserve ratio. Reserve ratio is an important tool to control the money supply.

Question

The net interest margin of a bank is a function of

A
What they pay for wages and the revenue
B
Their cost of funds and what they earn from giving out loans
C
Whatever the CEO and Board of Director think is fair
D
The marginal propensity to prosperity

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