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Suppose a bank has assets of $100 billion and liabilities of $90 billion. The banks assets have a duration of 5 years and the banks
Suppose a bank has assets of $100 billion and liabilities of $90 billion. The banks assets have a duration of 5 years and the banks liabilities have a duration of 1 year. Suppose in a given period interest rates rise from 2% to 4%. How much will the banks shareholders equity change over that period? (Choose the closest answer)
A) It will increase by about $4 billion
B) It will decrease by about $4 billion
C) It will increase by about $8 billion
D) It will decrease by about $8 billion
E) It will not change
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