Suppose First National Bank holds $100 million in assets with an average duration of 4 years, and it holds $85 million in liabilities with an average duration of 2 years. Further suppose there is a 4-percentage-point increase in interest rates. Calculate the percentage decrease in First National Bank's net worth relative to the total original asset value. A 4-percentage-point increase in interest rates decreases First National Bank's net worth by % of the total original asset value. (Round your response to two decimal places.)

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
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Suppose First National Bank holds $100 million in assets with an average duration of 4 years, and it holds $85 million in liabilities with an average duration of 2 years.
Further suppose there is a 4-percentage-point increase in interest rates. Calculate the percentage decrease in First National Bank's net worth relative to the total original
asset value.
A 4-percentage-point increase in interest rates decreases First National Bank's net worth by % of the total original asset value. (Round your response to two decimal
places.)
Transcribed Image Text:Suppose First National Bank holds $100 million in assets with an average duration of 4 years, and it holds $85 million in liabilities with an average duration of 2 years. Further suppose there is a 4-percentage-point increase in interest rates. Calculate the percentage decrease in First National Bank's net worth relative to the total original asset value. A 4-percentage-point increase in interest rates decreases First National Bank's net worth by % of the total original asset value. (Round your response to two decimal places.)
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