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Community Center Bank earned 6% on its assets and paid 5% on its liabilities in year one. The bank was facing reinvestment risk. In year two, the bank had a negative profit spread of 100 basis points. Which of the following is true? In year two

Community Center Bank earned 6% on its assets and paid 5% on its liabilities in year one. The bank was facing reinvestment risk. In year two, the bank had a negative profit spread of 100 basis points. Which of the following is true? In year two

Macroeconomics: Private and Public Choice (MindTap Course List)
Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter13: Money And The Banking System
Section: Chapter Questions
Problem 1CQ
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Community Center Bank earned 6% on its assets and paid 5% on its liabilities in year one. The bank was facing reinvestment risk. In year two, the bank had a negative profit spread of 100 basis points. Which of the following is true? In year two Select one: a. Rates rose 200 basis points Ob. Rates fell 200 basis points Oc. Rates fell 300 basis points Ⓒd. Community Center Bank became insolvent e. Rates rose 300 basis points A
Transcribed Image Text:Community Center Bank earned 6% on its assets and paid 5% on its liabilities in year one. The bank was facing reinvestment risk. In year two, the bank had a negative profit spread of 100 basis points. Which of the following is true? In year two Select one: a. Rates rose 200 basis points Ob. Rates fell 200 basis points Oc. Rates fell 300 basis points Ⓒd. Community Center Bank became insolvent e. Rates rose 300 basis points A
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