If an Organisation Has a Repricing Gap Equal to a Positive

question 51

Multiple Choice

If an organisation has a repricing gap equal to a positive $20 million,a 500 basis point drop in interest rates will cause profits to:

• A) rise by $1.0 million.
• B) rise by $10 million.
• C) fall by $1.0 million.
• D) fall by $10 million.

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Definitions:

Profit-Maximizing Quantity

The level of production at which a business achieves the highest amount of profit, where marginal revenue equals marginal cost.

Economic Profit

Economic profit is the difference between total revenue and total costs, including both explicit and implicit costs.

Total Fixed Costs

The sum of all costs that remain constant regardless of the level of production or output in the short term.

Total Variable Costs

The total of all costs that vary with the level of output, including costs such as materials and labor that change with the scale of production.