-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:

Deferred Revenue

Income received by a company for products or services yet to be delivered or completed, considered a liability until the revenue is earned.

Unearned Rent

Income received by a property owner for which the services (use of property) have not yet been provided.

Expense Accounts

Accounts used to track money spent or costs incurred in a business's operational activities.

Asset Accounts

Accounts that track the value of a company's economic resources, or assets, such as cash, inventory, property, and equipment.