Consider the following two FIs: Company A has $500 million in total assets and total costs equal to $200 million. Company B has $60 million in total assets and total costs equal to $24 million
-What are average costs for each FI?
A) 0.40 for A and 2.50 for B.
B) 2.50 for both A and B.
C) 2.50 for A and 0.40 for B.
D) 0.40 for both A and B.
E) Insufficient information.

Question

Quizplus · Accepted Answer

Average cost is calculated as total costs divided by total assets. For Company A, average cost is ($200 million/$500 million) = 0.4. For Company B, average cost is ($24 million/$60 million) = 0.4. Therefore, the answer is D, which states that average cost for both FIs is 0.4.

Consider the Following Two FIs: Company a Has $500 Million