If a Decline in Interest Rates Causes the Market Value

question 12

Multiple Choice

If a decline in interest rates causes the market value of a bank's net worth to rise,then the bank must have a ________.

• A) negative duration gap
• B) positive duration gap
• C) negative gap
• D) positive gap

Understand the effects of expenses and dividends on stockholders' equity.

Grasp the concept and reporting of prior period adjustments in financial statements.

Know the requirement of retained earnings for the declaration of cash dividends.

Comprehend the rationale behind stock dividends and their impact.

---

Definitions:

Door-In-The-Face Technique

A persuasion strategy whereby a larger, less achievable request is made first, followed by a smaller, more reasonable request.

Foot-In-The-Door Effect

A psychological principle that suggests agreeing to a small request increases the likelihood of agreeing to a larger request later.

Compliance

The act of conforming to or following rules, standards, or laws, or yielding to a request or command from an authority.

Low-Ball Technique

A strategy in which someone makes a very attractive initial offer to get a person to commit to an action and then makes the terms less favorable.