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For Commerce bank, the repricing gap is $1 million, the average duration of assets is 2.55 years and the average duration of liabilities is 1.69
For Commerce bank, the repricing gap is $1 million, the average duration of assets is 2.55 years and the average duration of liabilities is 1.69 years. Which of the following statements is WRONG? Formulas: Repricing GAP = Rate-sensitive assets - Rate-sensitive liabilities ANet Interest Income = Repricing GAP * Ainterest rates Duration GAP = weighted average Duration of assets - weighted average Duration of liabilities O A) A 1% decrease in market interest rates causes the bank to lose profits because interest income decreases more than interest expenses. O B) A 1% decrease in market interest rates increases the value of liabilities by 1.69%. O C) A 1% decrease in market interest rates causes the bank to lose profits because interest income increases less than interest expenses. OD) A 1% increase in market interest rates reduces the value of equity by 0.86%
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