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

question 13

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 five-year, 10 percent annual coupon par value loans, what is the market, or economic, value of capital if interest rates decrease 2 percent?

• A)$35 million.
• B)$96 million.
• C)$60 million.
• D)-$7 million.
• E)$0.

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Definitions:

Dollar Sales

The total revenue generated from goods or services sold, measured in dollar value.

Break-Even

The situation where overall costs are equivalent to overall revenues, resulting in neither gains nor losses.

Monthly

Referring to something that occurs, is measured, or is paid every month.

Dollar Sales

Total revenue generated from the sale of goods or services, expressed in dollars.