The Following Three FIs Dominate a Local Market and Their

question 115

Multiple Choice

The following three FIs dominate a local market and their total assets are given below.
$\begin{array}{lccc} \text {Institution }& \text { Asset Size}\\ \text {Bank A}&\$ 50 \text { million}\\ \text {Bank B}& \$ 60 \text { million}\\ \text {Bank C}&\$ 90 \text { million}\\\end{array}$
Under the 1982 guidelines,would the Fed approve the merger of Banks A and B?

• A)It is likely to approve because it is not a concentrated market.
• B)It is unlikely to approve because the post-merger HHI has increased by over 100.
• C)It is likely to approve because the post-merger HHI has increased by over 100.
• D)Likely to approve because the post-merger HHI has increased by less than 5,000.

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Definitions:

Compounded Annually

A method of calculating interest where the interest earned each year is added to the principal, and in the next year, interest is earned on the new principal sum.

Lump Sum

A singular transaction carried out at a specific point in time, as opposed to a sequence of smaller installments.

Savings

Money set aside for future use, often accumulating interest in a financial institution.

Rate of Return

The profit or deficit generated from an investment over an indicated time frame, shown as a ratio of the investment's initial cost.