22) Assume that the average duration of a bank's $100 million of assets is five years, while the average duration of its $80 million of liabilities is three years. Suppose a 5 percentage point increase in interest rates occ Calculate: a. the change in the value of the assets; b. the change in the value of the liabilities; c. the change in the bank's net worth.
22) Assume that the average duration of a bank's $100 million of assets is five years, while the average duration of its $80 million of liabilities is three years. Suppose a 5 percentage point increase in interest rates occ Calculate: a. the change in the value of the assets; b. the change in the value of the liabilities; c. the change in the bank's net worth.
Economics (MindTap Course List)
13th Edition
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter12: Money, Banking And The Financial System
Section: Chapter Questions
Problem 3WNG
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Transcribed Image Text:22)
Assume that the average duration of a bank's $100 million of assets is five years, while the average
duration of its $80 million of liabilities is three years. Suppose a 5 percentage point increase in interest rates occurs.
Calculate:
a. the change in the value of the assets;
b. the change in the value of the liabilities;
c. the change in the bank's net worth.
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