Assume a Bank Has $200 Million of Assets with a Duration

question 42

Multiple Choice

Assume a bank has $200 million of assets with a duration of 2.5, and $190 million of liabilities with a duration of 1.05. If interest rates increase from 5 percent to 6 percent, the net worth as a percentage of assets would ________ by approximately ________.

• A) increase; 1.8%
• B) decrease; 1.8%
• C) increase; 1.4%
• D) decrease; 1.4%

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Definitions:

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