Theoretically, the minimum yield on bank investments that must be earned to avoid a loss in equity share values should equal the:
A) average cost of funds
B) total cost of funds
C) the marginal weighted average cost of funds
D) none of the above

Question

Quizplus · Accepted Answer

The minimum yield on bank investments that must be earned to avoid a loss in equity share values should equal the marginal weighted average cost of funds. This is because it reflects the cost of the next dollar of financing, which directly impacts the bank's profitability and, consequently, the value of its equity shares.

Theoretically, the Minimum Yield on Bank Investments That Must Be