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Unformatted text preview: the nominal interest rate they charge people to borrow money can be considered the banks gross profit margin. Remember, the bank has costs associated with borrowing and lending money as well; so that spread is not all cream! A bank must also consider the risk that it is taking lending money to folks There are some also consider the risk that it is taking lending money to folks. There are some people that will not be able to pay their loans back, and the bank can incur losses on that transaction. The other two interest rates, the real rate, and the risk-free rate will be explained very shortly. 8...
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- Fall '10
- Interest Rates