Suppose interest rate increased by 5 percentage points


Assets = $200m,    

liabilities = $180m,     

capital = $20m,  

avg. duration of assets = 3 years,

average duration of liabilities = 2years.

 

Suppose interest rate increased by 5 percentage points. Using the duration analysis find the change in net worth of the bank?

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Financial Management: Suppose interest rate increased by 5 percentage points
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