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.
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
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If a bank has net-interest-margin (NIM) of 4% and return-on-assets (
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.
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