The Average Duration of the Loans Is 10 Years What Is the Cash Spread Earned by the FI If

question 81

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 cash spread earned by the FI if at the end of the year the $\le$ is trading at $1.63/ $\le$ in the cash market? Again adjust for all exchange rate changes.

• A)$1,610,000 gain.
• B)$1,610,000 loss.
• C)$2,670,000 loss.
• D)$2,670,000 gain.

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Definitions:

Merchandise

Goods that are bought and sold in the course of business, usually in a retail environment.

Delivery Expense

The costs incurred by a business to transport its goods to the customer, often treated as a direct or indirect expense depending on the nature of the expense allocation.

Expense Account

An accounting account that tracks money spent or costs incurred in a business entity's operation.

Perpetual Inventory System

An inventory management accounting method that instantly documents transactions of buying or selling inventory via computerized point-of-sale systems and enterprise asset management applications.