395 $
© 2014 Pearson Canada Inc.$13.8 Appendix 13.2: Nonbanking Financial Institutions and Duration Analysis
If interest rates increase from 9 percent to 10 percent, a bank with a duration gap of 2 years
would experience a decrease in its net worth of ____.
A) 0.9 percent of its assets
B) 0.9 percent of its liabilities
C) 1.8 percent of its liabilities
D) 1.8 percent of its assets
Answer: D
Diff: 2 Type: MC Page Ref: 13.2A- 3
Topic: Questions for Web Appendix on Duration Gap Analysis
Skill: Applied
Objective List: 13.4 Explain gap analysis and duration analysis
Assume a bank has $200 million of assets with a duration of 2.5, and $190 million of
liabilities with a duration of 1.05. If interest rates increase from 5 percent to 6 percent, the net
worth of the bank falls by ____.
A) $1 million
B) $2.4 million
C) $3.6 million
D) $4.8 million
Answer: D
Diff: 2 Type: MC Page Ref: 13.2A- 3
Topic: Questions for Web Appendix on Duration Gap Analysis
Skill: Applied
Objective List: 13.4 Explain gap analysis and duration analysis