Respuesta :
A 5-percentage-point decrease in interest rates will cause the net worth of First National Bank to increase by $13 million.
The calculation for the change in net worth will be:
= [(-Da) × ∆i / 1 - i × assets value)] - [(-Dl) × ∆i/1 + I × liability value)]
where,
∆i = change in interest rate
i = current interest
Da = duration of assets.
= [(-5) × 0.05/1 + 0×100)] - [(-3) × 0.05 / 1 + 0.80]
= 25 - 12
= 13 million
Therefore, the net worth of First National Bank will increase by $13 million.
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