A savings and loan has extremely long-term assets that are currently matched against extremely short-term liabilities.For this S&L:
A)falling interest rates will decrease the value of its equity.
B)falling interest rates will increase the value of its equity.
C)rising interest rates will increase the value of its equity.
D)rising interest rates will decrease the value of its equity.
E)Both B and D.

Question

Quizplus · Accepted Answer

Falling interest rates increase the value of long-term assets more than short-term liabilities, increasing equity. Rising rates decrease asset values more than liabilities, decreasing equity.

A Savings and Loan Has Extremely Long-Term Assets That Are