Question: 9PROLUS Problem 3 (3 marks): ABC bank has an average asset duration of 4.25 years and an average liability duration of 2.75 years. Its

9PROLUS Problem 3 (3 marks): ABC bank has an average asset duration

9PROLUS Problem 3 (3 marks): ABC bank has an average asset duration of 4.25 years and an average liability duration of 2.75 years. Its liabilities amount to $575 million, while its assets total $605 million. Suppose that interest rates were 6 percent and then rise to 7 percent. What will happen to the value of the ABC bank's net worth as a result of a decline in interest rates?

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