First National Bank of America has more than 75% of its assets in first residential fixed-rate mortgages that mature in more tha
n 5 years. Suppose that a 12-month Gap Analysis predicts a decrease in 2021 interest income of $3 million if there is a sudden 1% drop in market interest rates. From your knowledge of the practical flaws in gap analysis, a realistic simulation analysis would predict that:_______. 1. Interest income will drop by more than $3 million for a sudden 1% drop in market interest rates
2. Interest income will drop by less than $3 million for a sudden 1% drop in market interest rates
2. Interest income will drop by less than $3 million for a sudden 1% drop in market interest rates
Explanation:
Since in the question it is mentioned that there is decrease in 2021 interest income of $3 million in the case when there is a sudden decline of 1% in the rate of interest of the market this is due to the convexity of the curve as the GAP analysis and assume straight line
Business activity is subject to the comings and goings of private initiative, so the expansion and recession phases of the economy affect the number of unemployed.
<u>Cyclical unemployment</u> increases considerably during times of recession, due to the deterioration of economic conditions; while decreasing in the stages of expansion, due to the improvement of the economy.
Governments try to reduce the incidence of this type of unemployment by softening the transition between different economic cycles. The objective is that the labor supply does not vary significantly between the stages of expansion and recession so that its demand is not excessively impaired.
If the award was unsolicited and given to Joan in recognition for her accomplishments in scientific, educational, literary, religious, artistic, or civic fields, then the award is not taxed.
The unsolicited part is the key here, since most awards are given to candidates that have been previously been nominated by someone, e.g. Nobel prizes are only given to nominated candidates and the winners must pay income taxes.
