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 decrease in interest rates will cause the net worth of First National to increase by $ million dollars (put a negative sign if it is a decrease).
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 decrease in interest rates will cause the net worth of First National to increase by $ million dollars (put a negative sign if it is a decrease).
Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter13: Money And The Banking System
Section: Chapter Questions
Problem 1CQ
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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 decrease in interest rates will cause the net worth of First National to increase by $ million dollars (put a negative sign if it is a decrease).
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- 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 _decrease_______ by $___13_____ million dollars. I got decreased by 13 million I took assets 25%(5%x5yrs) then liabilities 15%(5%x3) then 25 million off assests and 12 million liabilities 25-12=13 million
increase; 15 |
||
decline; 5 |
||
increase; 25 |
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decrease; 13 |
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