The Numbers Provided by Fourth Bank of Duration Are in Thousands

Multiple Choice

The numbers provided by Fourth Bank of Duration are in thousands of dollars.

Notes: All Treasury bills have six months until maturity.One-year Treasury notes are priced at par and have a coupon of 7 percent paid semiannually.Treasury bonds have an average duration of 4.5 years and the loan portfolio has a duration of 7 years.Time deposits have a 1-year duration and the Fed funds duration is 0.003 years.Fourth Bank of Duration assigns a duration of zero (0) to demand deposits.
-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, $\Delta$ R/(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.