For Every $100 in Assets, a Bank Has $30 in Interest-Rate

question 49

Multiple Choice

For every $100 in assets, a bank has $30 in interest-rate sensitive assets, and the other $70 in non-interest-rate sensitive assets. The same bank has $60 for every $100 in liabilities in interest-rate sensitive liabilities, the other $40 are in liabilities that are not interest-rate sensitive. If the interest rate on assets decreases from 6 to 5 percent, and the interest rate on liabilities decreases from 4 to 3 percent, the impact on the bank's profits per $100 of assets will be:

• A) a reduction of $0.30.
• B) an increase of $0.30.
• C) a reduction of $3.00.
• D) zero since the interest rates on assets and liabilities fell by the same amount.

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Definitions:

Neutral Stimulus

A neutral stimulus is initially unrelated and unresponsive to any specific response until it becomes associated with a conditioned stimulus in classical conditioning.

Conditioned Stimulus

A previously neutral stimulus that, after becoming associated with the unconditioned stimulus, eventually comes to trigger a conditioned response.

Reinforcer Stimulus

A stimulus that increases the likelihood of a behavior by providing a rewarding outcome.

Unconditioned Stimulus

A stimulus that naturally and automatically triggers a response without prior conditioning or learning.