Use the Following Bank Information for Questions -If Interest Rates Decrease 1% for All Assets and Liabilities

question 33

Multiple Choice

Use the following bank information for questions .
$\begin{array}{|l|l|l|l|l|l|l|l|}\hline &\begin{array}{c}\text { Market } \\\text { Value }\end{array} &\text { Rate } & \begin{array}{c}\text { Duration } \\\text { (Years) }\end{array} & \begin{array}{c}\text { Liabilities }\\\text { and } \\\text { Equity }\end{array} & \begin{array}{c}\text { Market } \\\text { Value }\end{array} & \text { Rate } & \begin{array}{c}\text { Duration } \\\text { (Years) }\end{array} \\\hline\text { Cash } & \$ 200 & && \text {Time Deposits } & \$ 600 &2.0 \% & 1.500 \\\hline \text { Loans } & \$ 800 & 8.0 \% & 3.750 &\text { CDs } & \$ 500 & 4.5 \% & 3.125 \\\hline\text { T-Bonds }&\$250&4.0\%&7.250&\text { Equity }&\$150&&\\\hline\text { Total }&\$1,250&&&&\$1,250\\\hline\end{array}$
-If interest rates decrease 1% for all assets and liabilities, what is the approximate expected change in the economic value of equity?

• A) -$2.56
• B) $5.84
• C) -$5.84
• D) $22.19
• E) -$22.19

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In economics, describing a situation where the supply or demand for a product is sensitive to changes in price, leading to greater percentage changes in quantity supplied or demanded.

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