QUESTION 10 A bank has borrowed $10 million from investors at 10% for 10 years.

Question

QUESTION 10 A bank has borrowed $10 million from investors at 10% for 10 years. After two years interest rates begin to increase. This would depress the value of the bank's liabilities which would boost the value of the bank's equity. True False QUESTION 11 The main source of funds for Dime Community Bank that it uses for its lending and investment activities include deposits, loan and MBS payments, investment security principal and interest payments, and advances from the Federal Home Loan Bank of New York (FHLBNY) True False

Explanation / Answer

False

Interest to be paid is a liability for thr banks and is added to the liability.

Bank's equity= assets - Liabilies

Increase in interest rate leads to increase in liabilities which lowers bank's equity.

True

Main source of funds for Dime community bank are deposits, loans, investment security, interest payment and advances from FHLBNY

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