If an Organisation Has a Repricing Gap Equal to a Negative

question 44

Multiple Choice

If an organisation has a repricing gap equal to a negative $30 million,a 500 basis point increase in interest rates will cause profits to:

• A) rise by $15 million.
• B) rise by $1.5 million.
• C) fall by $15 million.
• D) fall by $1.5 million.

Grasp the concepts of equity, liabilities, and asset management within a business context.

Identify the various branches of accounting and their roles in business decision-making.

Recognize the importance of the balance sheet and its constituents in reflecting a company's financial position.

Understand the types of businesses and the accounting distinctions relevant to their operations.

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Definitions:

Credit Extended

Credit extended refers to the amount of credit or loan a lender provides to a borrower, allowing them to purchase goods or services on credit.

Discount

A reduction in the price or value of a product, security, or bond below its nominal or face value, often to encourage sale or investment.

Break-Even Default Rate

The default rate at which the expected return from a loan equals the cost of the loan, resulting in no profit or loss.

Net 30 Credit Policy

A specific credit term where customers are given 30 days to pay the invoice in full, widely used in business transactions to manage cash flow.