-If Interest Rates Rise by 5 Percentage Points, Say from 10

question 69

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

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Definitions:

Dividend Yield

A ratio that compares the amount a company pays annually in dividends to the price of its shares.

Stock Price

The stock price is the cost of a single share of a number of saleable stocks of a company, derivative, or other financial asset.

Quarterly Dividend

A dividend paid by a company to its shareholders every three months.

Value Weighted

Describes a method of calculating indexes where each component is weighted according to its market value.