Assuming that the average duration of First National Bank's $100 million assets is five years, while the average duration of its $80 million liabilities is three years, then a 5 percentage point increase in interest rates will cause the net worth of First National to increase by $ (put a negative sign if it is a decrease) million dollars.

Assuming that the average duration of First National Bank's $100 million assets is five years, while the average duration of its $80 million liabilities is three years, then a 5 percentage point increase in interest rates will cause the net worth of First National to increase by $ (put a negative sign if it is a decrease) million dollars.

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter9: The Cost Of Capital

Section: Chapter Questions

Problem 16P

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