The earnings spread for a bank is equal to:
A)total interest income divided by total earning assets less total interest expense divided by total interest-bearing bank liabilities.
B)total interest income less total interest expenses divided by earning assets.
C)total operating revenues less total operating expenses divided by total assets.
D)total cash and noncash expenses subtracted from interest and noninterest income divided by total assets.
E)None of the options is correct.

Question

Quizplus · Accepted Answer

The earnings spread for a bank is the difference between the interest earned on loans and other interest-earning assets and the interest paid on deposits and other interest-bearing liabilities. Option A is the correct formula for calculating the earnings spread as it takes into consideration both the interest income and interest expenses. Option B only considers the difference between interest income and expenses, while Options C and D calculate different ratios unrelated to the earnings spread. Option E is incorrect as there is a correct answer.

The Earnings Spread for a Bank Is Equal To