For a Bank, the Difference Between the Interest Rate Charged

question 67

Multiple Choice

For a bank, the difference between the interest rate charged to borrowers and the interest rate paid on liabilities is called the ________.

• A) insurance premium
• B) interest rate spread
• C) risk premium
• D) term premium

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Definitions:

Depreciation

An accounting method to allocate the cost of a tangible asset over its useful life, reflecting wear and tear, decay, or obsolescence.

Gift Tax

A tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return.

Fair Market Value

The price at which an asset would trade in a competitive auction setting, reflecting the value of the asset in the marketplace.

Gain

The financial benefit obtained when the selling price of an asset exceeds its purchase price.