narket value of is 80 million pon

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter2: The Domestic And International Financial Marketplace
Section: Chapter Questions
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b) Suppose that the Duration of Assets (DA) is 5 years and the duration of
liabilities (DL) is 3 years. The current market value of assets is 100 million
pounds and the market value of liabilities is 80 million pounds. What would be
the effect (loss or gain) on the market value of equity (dE) if interest rates
increase from 5% p.a. to 7% p.a. ?
Transcribed Image Text:b) Suppose that the Duration of Assets (DA) is 5 years and the duration of liabilities (DL) is 3 years. The current market value of assets is 100 million pounds and the market value of liabilities is 80 million pounds. What would be the effect (loss or gain) on the market value of equity (dE) if interest rates increase from 5% p.a. to 7% p.a. ?
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