Use the Following Table to Answer the Question

question 67

Multiple Choice

Use the following table to answer the question :

-Assuming that the average duration of its assets is five years,while the average duration of its liabilities is three years,then a 5 percentage point increase in interest rates will cause the net worth of First National to decline by ________ of the total original asset value.

• A)5 percent
• B)10 percent
• C)15 percent
• D)25 percent

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Definitions:

Buying Power

The amount of goods or services that can be purchased with a unit of currency.

Flexible Exchange Rates

A currency system where the price of a country's currency is set by the forex market based on supply and demand relative to other currencies.

Macroeconomic Instability

Occurs when an economy experiences high levels of volatility in factors such as inflation, growth rates, and unemployment, often leading to economic downturns.

Comparative Advantage

The ability of an entity to produce a good or service at a lower opportunity cost than others, promoting trading benefits.