The assets in value by $billion. (Round your response to one decimal place.) The liabilities in value by $billion. (Round your response to one decimal place.) The net worth of the bank by $ billion. (Round your response to one decimal place.) What action will not reduce the bank's interest-rate risk?
The assets in value by $billion. (Round your response to one decimal place.) The liabilities in value by $billion. (Round your response to one decimal place.) The net worth of the bank by $ billion. (Round your response to one decimal place.) What action will not reduce the bank's interest-rate risk?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Suppose you are the manager of a bank whose $150 billion of assets have an average duration of six years and whose $130 billion of liabilities have
an average duration of five years. Conduct a duration analysis for the bank, and show what will happen to the net worth of the bank if interest rates
rise by 3 percentage points.
The assets
in value by S
billion. (Round your response to one decimal place.)
The liabilities
V in value by $ billion. (Round your response to one decimal place.)
The net worth of the bank
V by $ billion. (Round your response to one decimal place.)
What action will not reduce the bank's interest-rate risk?
O A. Swapping the interest earned on the assets with the interest on another bank's assets that have a duration of five years.
O B. Lengthening the maturity of the liabilities to a duration of six years.
O C. Lenghtening the maturity of the assets to a duration of eleven years.
O D. Shortening the maturity of the assets to a duration of five years.
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