-What will be the impact, if any, on the market value of the bank's equity if all interest rates increase by 75 basis points?
A)The market value of equity will decrease by $15,750.
B)The market value of equity will increase by $15,750.
C)The market value of equity will decrease by $426,825.
D)The market value of equity will increase by $426,825.
E)There will be no impact on the market value of equity.

Question

-What will be the impact, if any, on the market value of the bank's equity if all interest rates increase by 75 basis points?
A)The market value of equity will decrease by $15,750. 
B)The market value of equity will increase by $15,750. 
C)The market value of equity will decrease by $426,825. 
D)The market value of equity will increase by $426,825. 
E)There will be no impact on the market value of equity.

Quizplus · Accepted Answer

An increase in interest rates generally leads to a decrease in the market value of a bank's equity because the present value of future cash flows decreases, and the cost of liabilities may increase.

-What Will Be the Impact, If Any, on the Market