The Following Three FIs Dominate a Local Market and Their

question 14

Multiple Choice

The following three FIs dominate a local market and their total assets are given below. $$\begin{array} { | c | r | } \hline \text { Institution } & \text { Asset Size } \\\hline \text { Bank A } & \text { \$50 million } \\\hline \text { Bank B } & \text { \$60 million } \\\hline \text { Bank C } & \text { \$90 million } \\\hline\end{array}$$ If Bank A acquires Bank B, what is the new Herfindahl-Hirschman Index (HHI) ?

• A)60.
• B)100.
• C)5,800.
• D)5,050.
• E)6,525.

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Definitions:

Interest Income

Earnings from investment in interest-bearing financial instruments, such as savings accounts, CDs, or bonds.

FMV

Fair Market Value (FMV) is the estimated price that an asset would sell for on the open market between a willing buyer and a willing seller.

Basis

The initial cost of an asset, adjusted for factors such as depreciation or improvements, used to calculate capital gains or losses for tax purposes.

Debt

Debt represents money borrowed by one party from another under the condition that it is to be repaid, usually with interest.