A Thrift Makes Long-Term Fixed-Rate Mortgages Funded with Short-Term Deposits

question 36

Multiple Choice

A thrift makes long-term fixed-rate mortgages funded with short-term deposits and then interest rates rise. Which of the following is true?

• A)Profitability would decline.
• B)Profitability would increase.
• C)The market value of equity increases.
• D)Interest income would fall.
• E)Profitability and market value of equity increase.

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Definitions:

Berries

Small, pulpy, and often edible fruits, typically consumed fresh, frozen, or in various prepared foods and beverages.

Perfect Substitute

A perfect substitute is a good or service that can be used in exactly the same way as another, meaning consumers are indifferent between the two.

Utility Function

A mathematical representation that ranks individuals' preferences or satisfaction derived from consuming goods and services.

Utility Function

An economic model representing the preferences of an individual or entity over a set of goods and services by assigning a level of utility to each potential bundle of consumption.