Multiple Choice
A bank has an average asset duration of 5 years and an average liability duration of 3 years.This bank has total assets of $500 million and total liabilities of $250 million.Currently,market interest rates are 10 percent.If interest rates fall by 2 percent (to 8 percent) ,what is this bank's change in net worth?
A) Net worth will decrease by $31.81 million.
B) Net worth will increase by $31.81 million.
C) Net worth will increase by $27.27 million.
D) Net worth will decrease by $27.27 million.
E) Net worth will not change at all.
Correct Answer:
Verified
Correct Answer:
Verified
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