Assume an FI Has $50 000 in Assets and $45

Multiple Choice

Assume an FI has $50 000 in assets and $45 000 in liabilities.Which of the following statements is true if interest rates on both assets and liabilities increase simultaneously?

A) As the interest rate for both assets and liabilities increase the value of the FI's net worth will remain constant.
B) As the interest rate for both assets and liabilities increase the value of the FI's assets and liabilities will both decrease.
C) As the interest rate for both assets and liabilities increase the value of the FI's assets and liabilities will both increase.
D) As the interest rate for both assets and liabilities increase the value of the FI's assets and liabilities will both increase; however, as the FI has more assets than liabilities, the increase in the value of the FI's assets will be greater than the increase in the value of its liabilities.