Alright Insurance has total assets of $140 million consisting of $50 million in 2-year, 6...
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Alright Insurance has total assets of $140 million consisting of $50 million in 2-year, 6 percent Treasury notes, and $90 million in 10-year, 7.2 percent fixed-rate Baa bonds. These assets are funded by $100 million 5-year, 5 percent fixed-rate GICs, and equity. Market interest rates are expected to increase by 1 percent to 11 percent in the next year. If this occurs, what will be the effect on the market value of equity of Alright?
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