The Following Information Is About Current Spot Rates for Second

question 30

Multiple Choice

The following information is about current spot rates for Second Duration Savings' assets (loans) and liabilities (CDs) . All interest rates are fixed and paid annually $$\begin{array} { | c | c | } \hline \text { Assets } & \text { Liabilities } \\\hline \text { 1-year loan rate: } 7.50 \text { percent } & \text { 1-year CD rate: } 6.50 \text { percent } \\\hline \text { 2-year loan rate: } 8.15 \text { percent } & \text { 2-year CD rate: } 6.65 \text { percent } \\\hline\end{array}$$
-What is the duration of the two-year loan (per $100 face value) if it is selling at par?

• A)2.00 years
• B)1.92 years
• C)1.96 years
• D)1.00 year
• E)0.91 years

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Definitions:

Price Elasticity

Measures the responsiveness of the quantity demanded of a good to a change in its price, indicating how changes in price affect consumer demand.

Demand Is Elastic

A condition where the quantity demanded of a good or service is significantly changed due to a change in its price. High elasticity indicates a sensitive reaction to price changes.

Total Revenue

The total amount of money received by a company for its goods or services before any expenses are subtracted.

Total Revenue

The total income generated by a firm from selling its goods or services.