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8 ) Suppose a bank with $ 5 0 0 million in assets has an average asset duration of 3 years, and an average liability

8) Suppose a bank with $500 million in assets has an average asset duration of 3 years, and an average liability duration of 1 year. The bank also has a total debt ratio of 90%. R may be thought of as the required return on equity or perhaps as the average interest rate level. If R is 12% and the bank is expecting a 50 basis point increase in interest rates within next 3 months, by How much will the equity value change?

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