A Bank's Net Interest Margin Is Calculated by Taking Net

question 18

Multiple Choice

A bank's net interest margin is calculated by taking net interest income and:

• A) dividing it by the bank's capital.
• B) dividing it by the bank's assets.
• C) dividing it by the sum of the bank's assets and capital.
• D) subtracting taxes.

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Definitions:

Unamortized Premium

The portion of the bond premium that has not yet been amortized or gradually written off against earnings over the bond's life.

Par-Value Approach

An accounting method that assigns a nominal value to the shares of a corporation, which may bear no correlation to the market value of those shares.

Common Shares

Equity securities representing ownership in a corporation, providing voting rights, and entitling holders to a share of the company’s success through dividends and/or capital appreciation.

Agency Approach

A mechanism used in financial management where one party (the agent) is allowed to act on behalf of another (the principal) in financial transactions or decisions.