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3) Suppose a bank has assets = $100, liabilities = $85, and owner's equity = $15; and that average duration of assets = 4 years
3) Suppose a bank has assets = $100, liabilities = $85, and owner's equity = $15; and that average duration of assets = 4 years and average duration of liabilities 3 years. If all interest rates increase from 3% to 3.5% per year: a) what is the change in the market value of the assets? b) What is the change in market value of the liabilities: c) What is the change in the overall value of the firm as measured by owner's equity = net worth
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