Spread

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Definition of 'Spread'
1. The difference between the bid and the ask price of a security or asset.

2. An options position established by purchasing one option and selling another option of the same class but of a different series.

Investopedia explains 'Spread'
1. The spread for an asset is influenced by a number of factors:

a) Supply or "float" (the total number of shares outstanding that are available to trade)
b) Demand or interest in a stock
c) Total trading activity of the stock

2. For a stock option, the spread would be the difference between the strike price and the market value.

 

Definition of 'Cost Of Funds'
The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one of the most important input costs for a financial institution, since a lower cost will generate better returns when the funds are deployed in the form of short-term and long-term loans to borrowers. The spread between the cost of funds and the interest rate charged to borrowers represents one of the main sources of profit for most financial institutions.

Investopedia explains 'Cost Of Funds'
For lenders such as banks and credit unions, cost of funds is determined by the interest rate paid to depositors on financial products including savings accounts and time deposits. Although the term cost of funds usually refers to financial institutions, most corporations that rely on borrowing are impacted by the costs they must incur to gain access to capital.