From a regulatory perspective, what is the impact on book value capital of a 25 basis point decrease in interest rates if the FI is holding a year, fixed-rate, 11 percent annual coupon $100,000 par value bond?

Question

Quizplus · Accepted Answer

The book value of a bond is based on its historical cost, not its market value. A change in interest rates affects the market value, not the book value, so there is no impact on book value capital.

From a Regulatory Perspective, What Is the Impact on Book