-If the Loan Portfolio Consists of a Five-Year, 10 Percent

$$\begin{array} { l l l l } \text { Securities (at par) } & \$ 250 & \text { Deposits } & \$ 975 \\\text { Loans (at par) } & \$ 760 & \text { Capital } & \$ 35\end{array}$$
-If the loan portfolio consists of a five-year, 10 percent annual coupon loan selling at par, what is the market, or economic, value of capital if interest rates increase 1 percent?

A) $35 million.
B) -$155 million.
C) $7 million.
D) -$7 million.
E) $0.

Correct Answer:

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