If a bank has net-interest-margin (NIM) of 4% and return-on-assets (ROA) of 0% then: Chose 1 option: -The bank is very profitable since a high NIM also implies a high return-on-equity (ROE). -The bank appears to be utilising its assets efficiently, since a high NIM implies a high asset utilisation (total revenue/total assets) rate. -The bank is making good money since NIM is a key measure of bank profitability. -None of the answers. The bank has ROE equal to zero.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
icon
Related questions
Question

If a bank has net-interest-margin (NIM) of 4% and return-on-assets (ROA) of 0% then:

Chose 1 option:

-The bank is very profitable since a high NIM also implies a high return-on-equity (ROE).
-The bank appears to be utilising its assets efficiently, since a high NIM implies a high asset utilisation (total revenue/total assets) rate.
-The bank is making good money since NIM is a key measure of bank profitability.
-None of the answers.
The bank has ROE equal to zero.
 
Thanks!
Expert Solution
Step 1

Return on Asset(ROA)

The return on assets indicates the profitability of the business by utilizing its assets. It can be calculated by dividing net income by the total assets of the business. It is always better to maintain a ROA of 5% and above. Below 5% indicates that the business is not effective. 

steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Balance Sheet Regulation
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education