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Consider a Financial Institution with $1000 face value bond on the asset-side which pays a coupon of 10% every year (yield is 10% as well).

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Consider a Financial Institution with $1000 face value bond on the asset-side which pays a coupon of 10% every year (yield is 10% as well). This asset has a maturity of 3 years. On the liability side, the Financial Institution has a 1-year maturity $800 CD on which it pays a coupon of 10% every year (yield is 10% as well). Equity is $200. What is the minimum interest rate increase can render this Financial Institution just insolvent? 16% B 18% 12% D 15% E 14%

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