For every $100 in assets, a bank has $30 in interest-rate sensitive assets, and the other $70 in non-interest-rate sensitive assets. The same bank has $60 for every $100 in liabilities in interest-rate sensitive liabilities, the other $40 are in liabilities that are not interest-rate sensitive. If the interest rate on assets decreases from 6 to 5 percent, and the interest rate on liabilities decreases from 4 to 3 percent, the impact on the bank's profits per $100 of assets will be:
A. a reduction of $0.30.
B. an increase of $0.30.
C. zero since the interest rates on assets and liabilities fell by the same amount.
D. a reduction of $3.00.
Answer: A
You might also like to view...
From an economic viewpoint, the optimal amount of pollution:
a. is zero since all pollution imposes costs on society. b. is that amount which firms create when they maximize economic profits by setting their marginal private costs equal to market price. c. is that amount where the marginal social costs of producing a good precisely equals the price of the good. d. b and c are correct.
In what way is the Social Security payroll tax regressive?
What will be an ideal response?
Following shifts can explain an increase in the price level and decrease in real output.
What will be an ideal response?
Which of the following would cause the equilibrium price of apple juice to decrease and the equilibrium quantity of apple juice to increase?
A) a decrease in the price of apples B) an increase in the price of apples C) an increase in the price of orange juice, a substitute for apple juice D) a decrease in the price of granola bars, a complement for apple juice