Question: Assets (millions) Liabilities & Equity (millions) Security 10 CD 9 Capital 1 Total Assets 10 10 Total Liabilities & Equity Scenario: The asset that bank

Assets (millions) Liabilities & Equity (millions) Security 10 CD 9 Capital

Assets (millions) Liabilities & Equity (millions) Security 10 CD 9 Capital 1 Total Assets 10 10 Total Liabilities & Equity Scenario: The asset that bank 1 holds is a 5 year bond with 8% annual coupon. The liability bank 1 holds is a 1 year CD that pays 3.45% annual interest. Interest rates fall by 0.75% for both the assets and liabilities. Calculate the present value of the bond after the interest rate change

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