Question
ABC Bank has total assets of $500 million and total liabilities of $450 million. The bank's asset duration is 2 years and liability duration is
ABC Bank has total assets of $500 million and total liabilities of $450 million. The bank's asset duration is 2 years and liability duration is 3 years. If interest rates increase by 1%, what is the expected change in the value of the bank's net worth? Assume a parallel shift in the yield curve and that the bank does not take any hedging action.
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Financial Institutions Management A Risk Management Approach
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