If Rate-Sensitive Assets Equal $600 Million and Rate-Sensitive Liabilities Equals

question 6

Multiple Choice

If rate-sensitive assets equal $600 million and rate-sensitive liabilities equals $800 million, what is the expected change in net interest income if rates fall by 1%?

• A) Net interest income will increase by $2 million.
• B) Net interest income will fall by $2 million.
• C) Net interest income will increase by $20 million.
• D) Net interest income will fall by $20 million.
• E) Net interest income will be unchanged.

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Definitions:

Target Cost

The maximum amount that can be spent on a product while still earning the required profit margin, based on market-driven pricing.

Desired Return

The target profit or return on investment that a company or investor aims to achieve.

Investment

Allocation of resources, typically money, in order to generate income or profit over time.

Selling Price

The amount of money a buyer pays to purchase a product or service from a seller.