A bank has total liabilities of $120 billion and total assets of $150 billion. The average...
A bank has total liabilities of $120 billion and total assets of $150 billion. The average duration of its liabilities is 3.9 years and the average duration of its assets is 8.2 years. If interest rate increases by 11%, what is the total change in net worth (in billions of $) of the bank? Round your answer to at least 2 decimal places. Insert a positive number to represent an increase in net worth and a negative number for a decrease. (E.g. a decrease of $5.5 billion has to be input as -5.5)
Homework Answers
| Liabilities(a) | 1,20,00,00,00,000 | |
| Duration of Liabilities (d1) | 3.9 | |
| Assets(b) | 1,50,00,00,00,000 | |
| Duration of Assets (d2) | 8.2 | |
| Net worth (b-a) | 30,00,00,00,000 | |
| Assuming interest rate (d) | 10% | |
| Change in Interest rate (e) | 11% | |
| % change in liabilities (-d1*(e/(1+d)) | -0.39 | |
| %change in assets (-d2*(e/(1+d)) | -0.82 | |
| Liabilities after interest increase (f) | 1,19,53,20,00,000 | |
| Assets after interest increase (g) | 1,48,77,00,00,000 | |
| Difference (g-f) | 29,23,80,00,000 | |
| Change | 76,20,00,000 | |
| Change in Bn | 0.76 |
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