Suppose a bank has an average asset duration of 3.78 years and an average liability duration of
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Suppose a bank has an average asset duration of 3.78 years and an average liability duration of 2.14 years. Its liabilities amount to $100 million, while its assets total $120 million. Assume that interest rates were 5 percent and then rise to 7 percent. What is the duration gap, and what will happen to the value of the bank's net worth as a result of this increase in interest rates?
Related Book For
Fundamental Accounting Principles
ISBN: 978-0078110870
20th Edition
Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta
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