A depository institution seeks to earn income from the positive spread between the assets it invests in and the cost of its funds.

Question

Quizplus · Accepted Answer

Depository institutions, such as banks, earn income primarily through the interest rate spread, which is the difference between the interest rates they pay on deposits (the cost of funds) and the interest rates they earn on loans and investments (the return on assets).

A Depository Institution Seeks to Earn Income from the Positive