If First State Bank Has a Gap Equal to a Positive

question 18

Multiple Choice

If First State Bank has a gap equal to a positive $20 million,then a 5 percentage point drop in interest rates will cause profits to

• A) increase by $10 million.
• B) increase by $1.0 million.
• C) decline by $10 million.
• D) decline by $1.0 million.

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Definitions:

Holder-of-record Date

The specified date set by a corporation by which one must be registered as a shareholder to be entitled to receive dividends or participate in certain corporate events.

Stock Rights

Opportunities given to existing shareholders to purchase additional shares of the company's stock, typically at a discount, before the stock is offered to the public.

Date of Record

The date set by a company on which the shareholders must be registered to be eligible for dividends or other benefits.

Penny Stocks

Refers to shares of small companies traded at very low prices, often considered highly speculative.