The Average Implicit Interest Rate Can Be Calculated as Follows

question 31

Multiple Choice

The average implicit interest rate can be calculated as follows: the difference between an FI's average:

• A) management costs per account per year and the average fees earned per account per year, multiplied by the average annual size of the account.
• B) management costs per account per year and the average fees earned per account per year, divided by the average annual size of the account.
• C) fees earned per account per year and average management costs per account per year, multiplied by the average annual size of the account.
• D) fees earned per account per year and average management costs per account per year, divided by the average annual size of the account.

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Definitions:

Marginal Costs

The cost added by producing one additional unit of a product or service.

Disposable Income

The amount of money individuals or households have to spend or save after taxes have been deducted.

Carrying Costs

Expenses associated with holding inventory, including storage, handling, insurance, and spoilage costs.

Variable Cost

Costs that change in proportion to the activity of a business such as production volume or sales.