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Suppose that the manager of a bank holds $100M in assets with an average duration of 4 years, and $90M in debt with an average
Suppose that the manager of a bank holds $100M in assets with an average duration of 4 years, and $90M in debt with an average duration of 6 years.
What does a duration analysis of this bank tell us? Show the impact of a 2 percentage point increase in interest rates on the bank's net worth. How can the bank reduce its interest rate risk?
What does a duration analysis of this bank tell us? Show the impact of a 2 percentage point increase in interest rates on the bank's net worth. How can the bank reduce its interest rate risk?
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ANSWER IS A duration analysis in this scenario helps assess the interest rate risk Duration measures ...
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Financial Reporting Financial Statement Analysis And Valuation A Strategic Perspective
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
9th Edition
1337614689, 1337614688, 9781337668262, 978-1337614689
