8-77 Suppose short-term interest rates increase by 1 percent.Calculate the change in net interest income after the interest rate increase.
A)$50,000.
B)$18,900.
C)$40,400.
D)$53,900.
E)$32,000.

Question

Quizplus · Accepted Answer

The correct answer is A because the change in net interest income is equal to the change in interest rates multiplied by the amount of debt. In this case, the change in interest rates is 1 percent, and the amount of debt is $5 million. Therefore, the change in net interest income is $50,000.

8-77 Suppose Short-Term Interest Rates Increase by 1 Percent