Based on the information above, (a) Do you agree that REC Bank’s net worth will increase when interest rate rises? Justify your answer with an appropriate analysis. (b) Evaluate the impact of reducing interest rate from 10 percent to 8 percent on the net worth of REC Bank.
Based on the information above, (a) Do you agree that REC Bank’s net worth will increase when interest rate rises? Justify your answer with an appropriate analysis. (b) Evaluate the impact of reducing interest rate from 10 percent to 8 percent on the net worth of REC Bank.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Based on the information above,
(a) Do you agree that REC Bank’s net worth will increase when interest rate rises? Justify your answer with an appropriate analysis.
(b) Evaluate the impact of reducing interest rate from 10 percent to 8 percent on the net worth of REC Bank.
Transcribed Image Text:The following information is obtained from REC Bank:
Asset
Liability and Equity
Amount
Duration
Amount
Duration
(RM’ 000)
1,500
2,500
|(RM’ 000)
3,000
2,500
2 years
4 years
Cash
Deposit
Non-deposit
borrowings
Equity
Treasury
6 months
bills
Loans and
8,000
3 years
6,500
advances
Total
12,000
Total
12,000
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