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A financial institution has the following balance sheet as of year-end 2020. Current interest rates are 3%. Based on its leverage-adjusted duration gap, what is
A financial institution has the following balance sheet as of year-end 2020. Current interest rates are 3%. Based on its leverage-adjusted duration gap, what is the impact on the institution's market value of equity (AE) of a 1% increase in interest rates? Bank of Mississippi (US$ million) Assets FYE 2020 Duration Liabilities and Equity FYE 2020 Duration Cash $100 Deposits $3.000 1 T-bills $100 0.5 Federal funds $500 0.25 Treasury notes $1,000 1 Other borrowings $1,000 3 Treasury bonds $1.500 2 Total liabilities $4,500 Loans 52.300 3 Equity $500 Total assets $5,000 Total liabilities and equity $5,000
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