The Third National Bank of Edmond reports a net interest margin of 5.83 percent.It has total interest revenues of $275 million and total interest expenses of $210 million.This bank has earnings assets of $1,115.Suppose this bank's interest revenues rise by 8 percent and its interest expenses and earnings assets rise by 10 percent next year,what is this bank's new net interest margin?
A)5.83 percent
B)7.09 percent
C)3.59 percent
D)5.38 percent
E)7.80 percent

Question

Quizplus · Accepted Answer

To calculate the new net interest margin, we need to first calculate the new interest revenues and interest expenses.

New interest revenues = $275 million x 1.08 = $297 million 
New interest expenses = $210 million x 1.10 = $231 million

Next, we need to calculate the new earnings assets.

New earnings assets = $1,115 million x 1.10 = $1,226.5 million

Finally, we can calculate the new net interest margin with the following formula:

New net interest margin = (New interest revenues - New interest expenses) / New earnings assets

New net interest margin = ($297 million - $231 million) / $1,226.5 million 
New net interest margin = $66 million / $1,226.5 million 
New net interest margin = 5.38%

Therefore, the correct answer is D) 5.38%.

The Third National Bank of Edmond Reports a Net Interest