A Bank Has an Average Asset Duration of 2

question 11

Multiple Choice

A bank has an average asset duration of 2.25 years,the average duration of the liabilities is 1.25 years,and the bank has total assets of $2 billion and $200 million in equity. The bank has an ROE of 9.00 percent. If all interest rates decrease 50 basis points,the predicted change in the bank's market value of equity is ________.

• A)−2.85 percent
• B)−3.55 percent
• C)3.55 percent
• D)2.85 percent
• E)5.16 percent

Analyze the effect of scale on production costs in both the short run and long run.

Distinguish between cost structures of different production levels and their implications for business decisions.

Recognize the relationship between the quantity of inputs and production efficiency.

Understand the significance of the shape of long-run average cost curves.

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Definitions:

Job-Order Costing

A cost accounting system that assigns costs to specific production batches or jobs, rather than to an entire production process.

Work in Process

Inventory consisting of items still in the production process, not yet completed but having incurred some direct material, labor, or overhead costs.

Manufacturing Overhead

These are all the indirect costs associated with the production process, excluding direct materials and direct labor.

Cost of Goods Sold

The immediate expenses linked to the manufacturing of a company's sold products, covering the cost of materials and labor directly engaged in the product's creation.