8-77 Suppose Short-Term Interest Rates Increase by 1 Percent

question 35

Multiple Choice

8-77 Suppose short-term interest rates increase by 1 percent.Calculate the change in net interest income after the interest rate increase.

• A)$50,000.
• B)$18,900.
• C)$40,400.
• D)$53,900.
• E)$32,000.

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Definitions:

Fair Market Value

The price at which an asset would trade in a competitive auction setting.

Sam, Capital

An account representing the owner's (Sam's) equity or ownership interest in a business.

Profit and Loss Ratio

An indicator that measures the ratio of profits earned to losses incurred over a particular period, often used to assess a company's financial health.

Income Summary

A temporary account in the ledger that summarizes revenue and expenses and transfers the balance (net income or net loss) to Capital. This account does not have a normal balance, i.e. it could have a debit or a credit balance.