Suppose the bank expects interest rates to rise which would impact the value of their government bonds. Suppose the price of the 10 year Treasury bonds is expected to change by 6%. Would this cause a problem for the bank? Why or why not?

Principles of Macroeconomics (MindTap Course List)
7th Edition
ISBN:9781285165912
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter16: The Monetary System
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Suppose the bank expects interest rates to rise which would impact the value of their
government bonds. Suppose the price of the 10 year Treasury bonds is expected to
change by 6%. Would this cause a problem for the bank? Why or why not?

 

 

Asset
Vault Cash
Reserves at the Fed
30 day Treasury Bills
10 year Treasury
Bonds
Mortgages
Federal Funds Loans
250,000
850,000
800,000
2,300,000
5,100,000
700,000
Liabilities
Checkable Deposits
Saving Deposits
Long-term Time Deposits 1,800,000
Discount Loans
Federal Funds Loans
Bank Capital
3,100,000
4,500,000
600,000
0
0
Transcribed Image Text:Asset Vault Cash Reserves at the Fed 30 day Treasury Bills 10 year Treasury Bonds Mortgages Federal Funds Loans 250,000 850,000 800,000 2,300,000 5,100,000 700,000 Liabilities Checkable Deposits Saving Deposits Long-term Time Deposits 1,800,000 Discount Loans Federal Funds Loans Bank Capital 3,100,000 4,500,000 600,000 0 0
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