Question

Al-Zain Bank has 1.5% net interest margin, 30 million OMR of earning assets, 20.4 million OMR...

Al-Zain Bank has 1.5% net interest margin, 30 million OMR of earning assets, 20.4 million OMR of Interest-bearing liabilities, and 900 thousand OMR interest expenses. Calculate the spread of A-Zain Bank.

Select one:
a. All the given answers in this question are wrong
b. 0.1359
c. 0.11
d. 0.08

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Homework Answers

Answer #1

D. 0.08%

Net Interest Margin (NIM) = (Interest Income - Interest Expense) / Interest Earning Assets

Given,

NIM = 1.50%

Interest Earning Assets = 30 Million OMR

Interest Bearing Assets = 20.4 Million OMR

Interest Expense = 900,000 OMR = 0.9 Million OMR

Net Interest Margin (NIM) = (Interest Income - Interest Expense) / Interest Earning Assets

1.5% = (Interest Income - 0.9) / 30

1.5 x 30 /100 = Interest Income - 0.9

0.45 = Interest Income - 0.9

Interest Income = 0.45 + 0.90 = 1.35 Million OMR

Spread =Interest Income / Interest Earning Assets - Interest Expense / Interest Bearing liabilities

= 1.35/ 30 - 0.9/20.4

= 0.4500 - 0.044

= 0.088%

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