What will be effect of an increase in interest rate

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1. Assume that the market value assets and liabilities of a bank are $120 million and $220 million, respectively, and their durations are 2 and 3. Find the new market value of assets that eliminates the interest-risk of this bank.

2. Assume that the assets and liabilities of a bank are $150 million and $120 million, respectively, and their durations are 3 and 4. What will be the effect of an increase in interest rate of 5% on the net worth of the bank? ?

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Reference no: EM131997766

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