A bank is earning 6% on its $150 million in earning assets and is paying 4.75% on its liabilities. The bank's NIM is __________________.

Question

Quizplus · Accepted Answer

NIM (Net Interest Margin) is calculated as the difference between interest income and interest expense divided by average earning assets. Here, the interest income is 6% of $150 million = $9 million, and the interest expense is 4.75% of $150 million = $7.125 million. The difference is $1.875 million ($9 million - $7.125 million). The NIM is then $1.875 million divided by $150 million, which equals to 1.25%. Therefore, the answer is C, 1.25%.

A Bank Is Earning 6% on Its $150 Million in Earning