Use the following balance sheet information to answer this question.

	Duration	Amount
T-bills	0.5	$ 500
T-notes	0.8	$ 50
T-bonds	4.5	$ 200
Loans	7	$3,000
Deposits	1	$2,750
Federal funds	0.01	$250
Equity		$750

If the entire yield curve shifted upward 0.9 percent (i.e., R/(1 + R) = 0.0090), what would be the FIs market value of equity?

Hint:

The duration of a portfolio of assets or liabilities is the market value weighted average of the durations of the component of the portfolio.

DGAP = D_A - kD_L

where k = L/A = Measure of the FIs leverage (i.e. the amount of borrowed funds or liabilities rather than owners equity used to fund its asset portfolio.)

MVE = - Leverage adjusted duration gap x Asset Size x Interest Rate Shock

In other words,

MVE = -DGAP * (A) * R/(1 + R)

		A)653
		B)701
		C)604
		D)721
		E) 575