General Accounting Assume a bank has $200 million ofassets with a duration of 2.5 and $190million of liabilities with a duration of1.05. If interest rates increase from 5percent to 6 percent, the net worth ofthe bank falls by:A) $1 million.B) $2.4 million.C) $3.6 million.D) $4.8 million.

Step 1: Define Net WorthIt is the net amount that is invested in the business or the net financial…

Answered: Assume a bank has $200 million of…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

ChapterM: Time Value Of Money Module

Section: Chapter Questions

Problem 2MC

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Assume a bank has $200 million of assets with a duration of 2.5 and $190 million of liabilities with a duration of 1.05. If interest rates increase from 5 percent to 6 percent, the net worth of the bank falls by: A) $1 million. B) $2.4 million. C) $3.6 million. D) $4.8 million.