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Prepare the bank balance sheet after the rate change

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Reference no: EM133159033

Question - Suppose that XYZ Bank's balance sheet is:

Asset (million cedis)

Liabilities (million cedis)

Loans 200

Deposit 160

 

Equity 40

Total 200

Total 200

Assume that the duration of the asset is 5 years and that of the liability is 3 years. The bank expects interest rate to rise by 1% from the current level of 10%.

Required -

a) Calculate the potential loss on the bank's net worth.

b) Prepare the bank's balance sheet after the rate change.

Reference no: EM133159033

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