Duration Bank Has the Following Assets and Liabilities as of Year-End

question 109

Multiple Choice

Duration Bank has the following assets and liabilities as of year-end. All assets and liabilities are currently priced at par and pay interest annually. What is the effect on the value of the FI's equity if interest rates decrease by 1 percent?

• A)Gain of $0.697 million.
• B)Gain of $0.338 million.
• C)Loss of $1.622 million.
• D)No change in equity.
• E)Loss of $0.605 million.

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Definitions:

Missouri Compromise

An agreement passed in 1820 between the pro-slavery and anti-slavery factions in the United States Congress, involving primarily the regulation of slavery in the western territories, admitting Missouri as a slave state and Maine as a free state.

Northern Politicians

Elected or appointed officials representing the interests of the northern region in a country, often with political agendas distinct from those in southern areas.

Panic of 1819

The first major peacetime financial crisis in the United States, followed by a general collapse of the economy that lasted until 1821, marked by widespread foreclosures, bank failures, and unemployment.

Bank War

Political struggle in the early 1830s between President Jackson and financier Nicholas Biddle over the renewing of the Second Bank’s charter.