First national bank assets liabilities rate-sensitive

Assignment Help Financial Management

Reference no: EM131571317

RATE-SENSITIVE

Assets: $20million

Liabilities: $50million

FIXED-RATE

Assets: $80million

Liabilities: $50million

First National Bank Assets Liabilities Rate-sensitive $20 million $50 million Fixed-rate $80 million $50 million Assuming that the average duration of its assets is five years, while the average duration of its liabilities is three years, then a 5 percentage point increase in interest rates will cause the net worth of First National to decline by approximately ________ of the total original asset value.

please show your calculation and explain why.

Reference no: EM131571317

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