A bank has assets with duration DA = 2.5 years, and liabilities with duration DL=...
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A bank has assets with duration DA = 2.5 years, and liabilities with duration DL= 0.80 years. The bank's leverage (k) is 92%. Assets are $1,200,000,000. According to the duration gap model, what size interest rate change (AR) would make the institution insolvent if interest rates are currently 5%? Multiple Choice AR=+1.5% la AR-1.5% AR=+4.76% AR= -4.76%
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