The Average Duration of the Loans Is 10 Years What Is the Net Gain or Loss on the Loan

question 77

Multiple Choice

The average duration of the loans is 10 years.The average duration of the deposits is 3 years. $$\begin{array} { | l | r | l | r | } \hline \text { Consumer loans } & \$ 50 \text { million } & \text { Deposits } & \$ 235 \text { million } \\\hline \text { Commercial Loans } & \$ 200 \text { million } & \text { Equity } & \$ 15 \text { million } \\\hline \text { Total Assets } & \$ 250 \text { million } & \text { Total Liabilities \& Equity } & \$ 250 \text { million } \\\hline\end{array}$$ What is the net gain or loss on the loan given that the exchange rates at the time of repayment were $1.63/? in the cash market and 1.62/? in the futures market? Assume that the futures position is opened and unwound as stated in previous question.

• A)$2,120,000 loss.
• B)$1,330,000 loss.
• C)$2,670,000 loss.
• D)$1,330,000 gain.
• E)$2,670,000 gain.

---

Definitions:

Norm

A standard or guideline that is accepted and expected within a group, culture, or society, dictating behavior that is considered normal or appropriate.

Reciprocity

A social exchange principle where the actions of one party lead to a response by another party, typically in a manner that mirrors the original action.

Norm Of Reciprocity

A social expectation that dictates individuals should return favors and kindnesses that others have provided to them, creating a basis for cooperative behavior.

Social Exchange

A concept proposing that the formation of human connections is guided by an individual assessment of potential gains and losses, alongside an evaluation of other options.