What Is the Effect on the Value of the FI's

question 75

Multiple Choice

What is the effect on the value of the FI's equity if interest rates decrease by 1 percent?

• A)Gain of $0.697 million.
• B)Gain of $0.338 million.
• C)Loss of $1.622 million.
• D)No change in equity.
• E)Loss of $0.605 million.

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Definitions:

α

In statistics, α (alpha) typically represents the level of significance, the probability of rejecting the null hypothesis when it is actually true.

Null Hypothesis

A hypothesis that assumes no statistical significance exists in a set of given observations and that any observed difference is due to chance.

T = 1.965

A specific value often used in statistical analysis, particularly in hypothesis testing, where it represents a critical value in a t-distribution.

Critical Value

A point on the test distribution that is compared with the test statistic to decide whether to reject the null hypothesis.