The bank's ROA is

Question

The bank's ROA is

Quizplus · Accepted Answer

ROA = Net Income / Total Assets

To calculate the net income, we need to subtract the interest expense from the operating income. From the two given options, we can see that the only difference is in their interest expenses, which are 87,000 and 122,000, respectively.

Let's calculate the net income for both options:

Net income for option 1:

Operating income = 820,000

Interest expense = 87,000

Net income = 820,000 - 87,000 = 733,000

Net income for option 2:

Operating income = 900,000

Interest expense = 122,000

Net income = 900,000 - 122,000 = 778,000

Now, let's calculate the ROA for both options:

ROA for option 1:

Total assets = 55,600,000

ROA = 733,000 / 55,600,000 = 0.0131 or 1.31%

ROA for option 2:

Total assets = 62,000,000

ROA = 778,000 / 62,000,000 = 0.0126 or 1.26%

Therefore, the bank's ROA is 1.26 percent (option C).

The Bank's ROA Is