If the Relative Change in Interest Rates Is a Decrease

Multiple Choice

If the relative change in interest rates is a decrease of 1 percent, calculate the impact on the bank's market value of equity using the duration approximation. (That is, ΔR/(1 + R) = -1 percent)

A) The bank's market value of equity increases by $325,550.
B) The bank's market value of equity decreases by $325,550.
C) The bank's market value of equity increases by $336,500.
D) The bank's market value of equity decreases by $336,500.
E) There is no change in the bank's market value of equity. [Refer to: 9-108]