Hy expert give me solution this question 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.

The question is about how an increase in interest rates will affect the bank's net worth.…

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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In the example below, we will use year-end assets. Bank A receives $70 in deposits at 5% and, together with 40 in equity, makes a loan of $90 at 7%. The remaining of assets is G-Bond. We will ignore taxes for the moment. Bank A Cash Reserves for Deposit ? Loan 7% $90 G-Bond 5% ? Deposits 5% $70 Equity $40 Total Assets $? Total Equity and Deposit $110 If Cash Reserves for deposit is at least 8% of the deposit under the Basel Accord, how much of the G-Bond Bank A should purchase? $17 $14 $16 $18 $20 $15 $19 $21
PLEASE SOLVE
In the example below, we will use year-end assets. Bank A receives $70 in deposits at 5% and, together with 40 in equity, makes a loan of $90 at 7%. The remaining of assets is G-Bond. We will ignore taxes for the moment. NIM=Profit/Interest revenue Bank A Loan 7% $90 G-Bond 5% ? Deposits 5% $70 Equity $40 Total Assets $? Total Equity and Deposit $110 The amount of G-bond is $50 $70 $20 $40 $80 $60 $30 $10

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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.