Suppose First National Bank holds $100 million in assets with an average duration of 4 years, and it holds $85 million in liabilities with an average duration of 2 years. Further suppose there is a 4-percentage-point increase in interest rates. Calculate the percentage decrease in First National Bank's net worth relative to the total original asset value. A 4-percentage-point increase in interest rates decreases First National Bank's net worth by % of the total original asset value. (Round your response to two decimal places.)

Suppose First National Bank holds $100 million in assets with an average duration of 4 years, and it holds $85 million in liabilities with an average duration of 2 years. Further suppose there is a 4-percentage-point increase in interest rates. Calculate the percentage decrease in First National Bank's net worth relative to the total original asset value. A 4-percentage-point increase in interest rates decreases First National Bank's net worth by % of the total original asset value. (Round your response to two decimal places.)

Principles of Macroeconomics (MindTap Course List)

7th Edition

ISBN:9781285165912

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter16: The Monetary System

Section: Chapter Questions

Problem 5PA

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