Question

A bank is earning 6 percent on its $150 million in earning assets and is paying 4.75 percent of its liabilities. The bank's interest rate spread is __________.
a. 6.00 percent.
b. 1.25 percent.
c. 4.75 percent.
d. 1.26 percent.
e. 10.75 percent

Answer 1

Answer:

Interest rate spread will be 1.25 %

Explanation:

We have given a bank is earning 6 % on its $150 million earning assets

So interest earned = 6 %

Interest paid on liabilities = 4.75 %

We have to find the bank interest rate spread

We know that bank interest rate spread is given by

Interest rate spread = interest earned - interest paid on liabilities = 6 - 4.75 = 1.25 %

So interest rate spread will be 1.25 %