The Average Duration of the Loans Is 10 Years What Is the Change in the Value of the FI's

question 7

Multiple Choice

The average duration of the loans is 10 years.The average duration of the deposits is 3 years. $\begin{array}{llr}\text { Consumer loans } & \$ 50 \text { million Deposits } & \$ 235 \text { million } \\\text { Commercial Loans } & \$ 200 \text { million Equity } & \$ 15 \text { million } \\\text { Total Assets } & \$ 250 \text { million Total Liabilities \& Equity } & \$ 250 \text { million }\end{array}$ What is the change in the value of the FI's equity for a 1 percent increase in interest rates from the current rates of 10 percent?

• A)-$,979,091.
• B)-$16,318,182.
• C)-$15,979,091.
• D)+$16,318,182.

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Definitions:

Normal Credit Balance

The expected balance on the credit side of an account, indicating an increase in liabilities, revenue, or equity.

Sales Discounts

Reductions in the selling price offered by a seller to encourage prompt payment by the buyer.

Sales Returns

Transactions involving the return of goods by customers, which reduce the total sales revenue.

Discount Period

The time frame within which a buyer can pay less than the full amount due on an invoice due to early payment incentives offered by the seller.