Duration Bank Has the Following Assets and Liabilities as of Year-End

question 109

Multiple Choice

Duration Bank has the following assets and liabilities as of year-end. All assets and liabilities are currently priced at par and pay interest annually. What is the effect on the value of the FI's equity if interest rates decrease by 1 percent?

• A)Gain of $0.697 million.
• B)Gain of $0.338 million.
• C)Loss of $1.622 million.
• D)No change in equity.
• E)Loss of $0.605 million.