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The bank you own has the following balance sheet where all assets are interest rate sensitive and no liabilities are interest rate sensitive: Assets: Liabilities:

The bank you own has the following balance sheet where all assets are interest rate sensitive and no liabilities are interest rate sensitive:

Assets: Liabilities:

Reserves $25 Deposits $80

Loans $75 Bank Capital $20

The average duration of assets is 5 years. Suppose interest rates decline by 4 percentage points. Calculate the change in the net worth of your bank.

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