Suppose a bank earned $173 million in interest on its assets of $2,153 million, it paid out $81 million in interest on its liabilities (excluding capital) of $2,007 million, and it paid its workers $71 million in total compensation.The bank's return on equity is approximately
A)12 percent.
B)14 percent.
C)16 percent.
D)18 percent.

Question

Quizplus · Accepted Answer

The bank's net income is calculated as interest earned minus interest paid out minus workers' compensation, which is $173 million - $81 million - $71 million = $21 million. The bank's equity is the difference between its assets and liabilities, which is $2,153 million - $2,007 million = $146 million. The return on equity (ROE) is then calculated as (Net Income / Equity) * 100 = ($21 million / $146 million) * 100 ≈ 14.38%, which rounds to approximately 14 percent.

Suppose a Bank Earned $173 Million in Interest on Its