-Using Standard Deviations, Which Bank Is in a Better Position

question 50

Multiple Choice

$$\begin{array} { l c l l } & \text { National Benchmark } & \text { Bank A } & \text { Bank B } \\\text { Consumer Loans } & 50 \text { percent } & 65 \text { percent } & 35 \text { percent } \\\text { Commercial Loans } & 50 \text { percent } & 35 \text { percent } & 65 \text { percent }\end{array}$$
-Using standard deviations, which bank is in a better position if the average earnings on the assets of Bank A is 11 percent and Bank B is 12 percent (ignore all other factors) ?

• A)Bank B, because its earnings of 12 percent is higher than Bank A's 11 percent while, its standard deviation is lower.
• B)Bank B, because its earnings of 12 percent is higher compared to Bank A's 11 percent, while its standard deviation is higher.
• C)Bank B, because its earnings of 12 percent is higher compared to Bank A's 11 percent, while its standard deviation is the same.
• D)Bank A, because although its earnings of 11 percent is lower compared to Bank B's 12 percent, its standard deviation is significantly lower.
• E)Bank A, because although its earnings of 11 percent is lower compared to Bank B's 12 percent, its standard deviation is the same.

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Definitions:

Expenses

The money spent or costs incurred in an entity's efforts to generate revenue, representing the cost of doing business.

Trial Balance

A financial report that lists the balances of all ledgers in an account to check the mathematical accuracy of bookkeeping entries.

Cash Salary

Compensation for services rendered by an employee or contractor that is paid in the form of immediately available funds rather than non-cash benefits.

Accounts Receivable

Funds owed to a company by customers who have purchased goods or services on credit.