From a Regulatory Perspective, What Is the Impact on Book

Multiple Choice

From a regulatory perspective, what is the impact on book value capital of a 25 basis point decrease in interest rates if the FI is holding a year, fixed-rate, 11 percent annual coupon $100,000 par value bond?

A) A decrease of $250.
B) An increase of $250.
C) An increase of $2,023.
D) A decrease of $1,959.
E) No impact on capital since the book value is unchanged.