If the market value of a bank's total assets is $1,000 million and total liabilities is $500 million. The average asset duration of the bank is 5 years and its average liability duration is 3 years. Currently, market interest rates are 8 percent. If interest rates increase by 2 percent.

Calculate this bank's change in net worth.

Net worth will decrease by $55.5 million.

Net worth will increase by $55.5 million.

Net worth will decrease by $64.81 million.

Net worth will increase by $64.81 million.

Answer rating: 100% (QA)

Net worth will decrease by 6481 million Workings Duration ... View the full answer