9-117 What Is the Effect of a 100 Basis Point

question 92

Multiple Choice

9-117 What is the effect of a 100 basis point increase in interest rates on the market value of equity of the FI? Use the duration approximation relationship.Assume r = 4 percent.

• A)-27.56 million.
• B)-28.01 million.
• C)-29.85 million.
• D)-31.06 million.
• E)-33.76 million.

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Definitions:

Commercial Paper

An unsecured, short-term debt instrument issued by corporations, typically for the financing of accounts receivable and inventories.

Short-Term Financing

Funding obtained for a period of one year or less, used to cover immediate needs such as working capital requirements.

Minimum Denomination

The smallest unit of value in which a security or financial instrument can be issued or traded.

Net Worth

The difference between an individual or household’s assets and liabilities.