If the Loan Portfolio Consists of a Five-Year,10 Percent Annual

question 14

Multiple Choice

$\begin{array}{lccc} \text { Securities (at par) } & \text { \$ 250 Deposits}& \$975 \\ \text { Loans (at par) } & \text { \$ 760 Capital} & \$ 35\end{array}$
If the loan portfolio consists of a five-year,10 percent annual coupon loan selling at par,what is the market,or economic,value of capital if interest rates increase 1 percent?

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

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