A bank has two, 3-year commercial loans. The first is a $30 million loan that requires a single payment of $39.93 million in 3 years, with no other payments until then. The second loan requires an annual interest payment of $7 million, and the principal of $70 million is due in 3 years. Both loans have the same interest rates.

What will happen to the value of its portfolio if the general level of interest rates increases by 1%? Choose the closest answer below.

Group of answer choices

The portfolio value will decrease by $2,558,978.

The portfolio value will increase by $2,558,978.

The portfolio value will increase by $2,486,852.

The portfolio value will decrease by $2,486,852.