Question
First Bank of Boston (FBB) has estimated the duration of its assets to be 12.7 years while its liabilities have an estimated duration of 10.2
First Bank of Boston (FBB) has estimated the duration of its assets to be 12.7 years while its liabilities have an estimated duration of 10.2 years.If FBB is anticipating a period of falling interest rates over the next several years, then which of the following is a TRUE statement?
FBB's market value of net worth should decrease.
FBB's market value of net worth should increase.
FBB's market value of net worth should remain unchanged.
The market value of FBB's liabilities is more rate-sensitive than the market value of its assets.
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Financial Markets and Institutions
Authors: Frederic S. Mishkin, Stanley G. Eakins
8th edition
013342362X, 978-0133423624
