If Interest Rates Rise by 5 Percentage Points,say from 10

question 106

Multiple Choice

If interest rates rise by 5 percentage points,say from 10 to 15 percent,bank profits (measured using basic gap analysis) will ________.

• A) decline by $0.5 million
• B) decline by $1.5 million
• C) decline by $2.5 million
• D) increase by $2.0 million

---

Definitions:

Raw Material

Basic substances in their natural, modified, or semi-processed states used as inputs for production processes to manufacture finished goods.

Materials Price Variance

The deviation between the actual and standard cost of materials used in production.

Materials Quantity Variance

The difference between the actual quantity of materials used in production and the expected quantity, valued at the standard cost.

Cost Drivers

Factors that cause a change in the cost of an activity; they are the structural determinants of the cost of an operation, influencing the expenses of certain business activities.