A depository institution's profit is derived from the difference between the

Question

Quizplus · Accepted Answer

A depository institution's main source of profit is the spread between the interest rate it pays on deposits and the interest rate it receives on loans. This is known as the net interest margin. Option A is incorrect because government securities are just one type of investment option for depository institutions. Option C is incorrect because reserves are not a source of profit but rather a requirement by regulatory bodies. Option D is incorrect because the difference between assets and liabilities is known as equity or net worth and is not directly related to profit. Option E is incorrect because the interest rate on foreign loans is not a primary source of profit for most depository institutions.

A Depository Institution's Profit Is Derived from the Difference Between