Question: what would be the effect of an interest rate decrease (sudden drop in interest rates) to the net worth (equity) of the bank balance sheet

what would be the effect of an interest rate decrease (sudden drop in interest rates) to the net worth (equity) of the bank balance sheet if the bank has a positive duration gap (assets more interest rate sensitive compared to liabilities) during the interest rate shock?

a. Equity value will become negative

b. Equity value will remain the same

c. Equity value will rise

d. Equity value will drop

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