cost of fund
The cost of funds represents the percentage of the interest-bearing deposits that the bank must pay out in interest. For Fictional Funds, the cost of funds would be the annualized interest expense of $20 million, divided by the average of interest-bearing deposits, which is $100 million.The cost of funds would be $20M/$100M, or 20 percent.he cost of funds is the interest rate that banks and other financial institutions pay to use their customer's money. Banks must calculate their costs of funds as part of their accounting procedures.