Question 6 A bank has an average asset duration of 4 years and an average...
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Accounting
Question 6
A bank has an average asset duration of 4 years and an average liability duration of 1.5 years. This bank has total assets of $500 million and total liabilities of $450 million. Currently, market interest rates are 10 percent. If interest rates rise by 1 percent (to 11 percent), what is this bank's change in net worth?
A.
Net worth will decrease by $12.05 million
B.
Net worth will decrease by $15.45 million
C.
Either the net worth will not change at all, or none of the other responses are correct.
D.
Net worth will increase by $15.45 million
E.
Net worth will increase by $12.05 million
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