Answered: Assuming that the average duration of…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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
		decrease; 13

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