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Assume that a bank manager immunized the balance sheet against interest rate risk by choosing the appropriate assets and liabilities when market interest rate was
Assume that a bank manager immunized the balance sheet against interest rate risk by choosing the appropriate assets and liabilities when
market interest rate was 10%. The net worth of the bank will
when the market interest rate suddenly increases from 10%
to 11%. After the rate change, if the asset and liability mix remains the same, the balance sheet will
be immunized against
further changes in interest rate.
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