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DCB Bank Has an Assets Size $1,200 Million, with Duration

question 11

Essay

DCB bank has an assets size $1,200 million, with duration DA = 2.5 years, DL = 0.80 years. In addition, the total liability is $1,104 million. According to the duration gap model, what size interest rate change would make the institution insolvent if rates are currently 5%?


Definitions:

Price Fixing

An illegal agreement among competitors to set prices at a certain level, aimed at manipulating the market and stifling competition.

Bundle Pricing

A pricing strategy where multiple products or services are packaged together and sold at a single price, often at a discounted rate compared to purchasing each item separately.

Inventory

A complete list of items such as property, goods in stock, or the contents of a building.

Regular Price

The standard selling price of a product or service without any discounts, promotions, or special offers.

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