If Problem Loans Reduce the Market Value of the Loan

question 39

Multiple Choice

$\begin{array}{lccc} \text { Securities (at par) } & \text { \$ 250 Deposits}& \$975 \\ \text { Loans (at par) } & \text { \$ 760 Capital} & \$ 35\end{array}$
If problem loans reduce the market value of the loan portfolio by 25 percent,what is the market value of capital?

• A)$35 million.
• B)-$155 million.
• C)$7 million.
• D)-$7 million.

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Definitions:

Total Expenditures

The sum of all spending incurred by individuals, firms, or the government within a specific period.

Isocost Line

A line representing all combinations of inputs that result in the same total cost for a firm.

Price Of Capital

The cost of using capital goods for production, often represented by interest rates or rental prices of equipment and machinery.

Slope

A measure of the steepness or incline of a line, indicating the rate of change between two variables on a graph.