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

Assets (millions) Security Liabilities & Equity (millions) 10 CD 9 1

Assets (millions) Security Liabilities & Equity (millions) 10 CD 9 1 Total Assets Capital 10 Total Liabilities & Equity 10 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 new equity value after the interest rate change

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