A Bank Has an Average Asset Duration of 5 Years

question 116

Multiple Choice

A bank has an average asset duration of 5 years and an average liability duration of 9 years.This bank has total assets of $1,000 million and total liabilities of $850 million.Currently,market interest rates are 5 percent.If interest rates rise by 2 percent (to 7 percent) ,what is this bank's change in net worth?

• A)Net worth will decrease by $50.47 million.
• B)Net worth will increase by $50.47 million.
• C)Net worth will decrease by $240.95 million.
• D)Net worth will increase by $240.95 million.
• E)Net worth will not change at all.

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