Question 6

A bank has an average asset duration of 4 years and an average liability duration of 1.5 years. This bank has total assets of $500 million and total liabilities of $450 million. Currently, market interest rates are 10 percent. If interest rates rise by 1 percent (to 11 percent), what is this bank's change in net worth?

	A.	Net worth will decrease by $12.05 million
	B.	Net worth will decrease by $15.45 million
	C.	Either the net worth will not change at all, or none of the other responses are correct.
	D.	Net worth will increase by $15.45 million
	E.	Net worth will increase by $12.05 million