-If All Interest Rates Decrease by 15 Basis Points, What

question 67

Multiple Choice

$$\begin{array} { | l | l | l | l | l | l | } \hline \text { Assets } & \text { Par Amount } & \text { Rate } & \text { Liabilities } & \text { Par Amount } & \text { Rate } \\\hline \text { 2-year commercial loans } & \$ 600 \text { million } & 10 \% & \text { 1-year CDs } & \$ 900 \text { million } & 7 \% \\\hline \text { 1-year Treasury bills } & \$ 400 \text { million } & & \text { Net Worth } & \$ 100 \text { million } & \\\hline\end{array}$$
-If all interest rates decrease by 15 basis points, what is the expected impact on the FI's net interest income? (Hint: Use the repricing model to answer this question.)

• A)+$150,000.
• B)-$150,000.
• C)-$750,000.
• D)+$750,000.
• E)No changE.

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Definitions:

Contract

A legally binding agreement between two or more parties that is enforceable by law, outlining obligations and rights of the parties involved.

Illusory Contract

A supposed agreement that lacks the necessary elements of a binding contract, giving the illusion of a mutual contract without any enforceable commitment.

Consideration Requirement

The consideration requirement is a fundamental principle of contract law that mandates a contract must involve an exchange of value between the parties for it to be legally binding.

Monetary Value

The specific amount of money something is worth, often determined by market conditions, demand, and utility.