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

question 122

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 of the bank falls by

• A)$1 million.
• B)$2.4 million.
• C)$3.6 million.
• D)$4.8 million.

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Definitions:

Collagen

The primary structural protein found in skin and other connective tissues, widely used in cosmetic and medical treatments.

Elastin

A highly elastic protein in connective tissue that allows many tissues in the body to resume their shape after stretching or contracting.

Reticular Fibers

Thin, branching fibers of collagen found in the connective tissue, supporting the soft tissue of organs.

Collagen α-Chains

The triple helical strands that make up collagen, the main structural protein in various connective tissues.