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

question 26

Multiple Choice

$$\begin{array} { l l l l } \text { Securities (at par) } & \$ 250 & \text { Deposits } & \$ 975 \\\text { Loans (at par) } & \$ 760 & \text { Capital } & \$ 35\end{array}$$
-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.
• E)$0.

Understand the concept of tax incidence and factors determining the burden distribution between consumers and producers.

Grasp the elasticity concept and its impact on the tax incidence.

Comprehend the principles behind different tax structures (progressive, regressive, and proportional) and their implications on equity and efficiency.

Interpret how taxes influence market outcomes, including deadweight loss and changes to consumer and producer surplus.

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Definitions:

Financial Statements

Formal records that outline the financial activities and condition of a business, organization, or individual, commonly including the balance sheet, income statement, and cash flow statement.

Balance Sheet Columns

Columns typically found in a balance sheet used to report a company's financial position at a certain point in time, showing assets, liabilities, and shareholders' equity.

Income Statement Columns

The segments in an income statement (profit and loss statement) that categorize financial data into revenues, expenses, and net income over a specific period.

Net Income

The total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue, indicating the company's profitability.