-What Is the Impact on the FI's Equity of a |

question 73

Multiple Choice

$$\begin{array} { | l | r | l | l | r | l | } \hline \text { Assets } & \begin{array} { l } \text { Amount } \\\text { (\$ millions) }\end{array} & \begin{array} { l } \text { Annual } \\\text { Rate }\end{array} & \text { Liabilities } & \begin{array} { l } \text { Amount } \\\text { (\$ millions) }\end{array} & \begin{array} { l } \text { Annual } \\\text { Rate }\end{array} \\\hline \text { 1-year bonds } & \$ 60 & 7 \% & \text { 1-year CD } & \$ 50 & 5 \% \\\hline \text { 10-year loan } & \$ 40 & 12 \% & \text { 2-year CD } & \$ 40 & 6 \% \\\hline & & & \text { Equity } & \$ 10 & \\\hline \text { Total } & \$ 100 & & \text { Total } & \$ 100 & \\\hline\end{array}$$
-What is the impact on the FI's equity of a 2 percent overall increase in market interest rates on all fixed-rate instruments?

• A)Equity rises by $4.318 million.
• B)Equity declines by $2.912 million.
• C)Equity rises by $2.060 million.
• D)Equity declines by $1.880 million.
• E)Equity does not change.

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Definitions:

Organizational Behaviour

The study of how individuals and groups act within organizations, and the impact of these behaviors on organizational effectiveness.

Formal Means

Formal means involve structured, official, and typically documented methods or procedures used to accomplish tasks or maintain order in organizations.

Pay

Compensation or wages received by an employee in exchange for their labor or services provided to an employer.

Promotions

The process of elevating an employee to a higher position or rank within an organization, often accompanied by increased responsibilities and pay.