QUESTION 55
Bank Asset Bond A
Bank Liability L
Settlement
43643
Settlement
43643
Maturity
50948
Maturity
47296
Rate
10%
Rate
8%
Yield
9%
Yield
7%
Redemption
100
Redemption
100
frequency
2
frequency
2
basis
0
basis
0
Assume that the only bank asset is the bond...
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Finance
QUESTION 55
Bank Asset Bond A
Bank Liability L
Settlement
43643
Settlement
43643
Maturity
50948
Maturity
47296
Rate
10%
Rate
8%
Yield
9%
Yield
7%
Redemption
100
Redemption
100
frequency
2
frequency
2
basis
0
basis
0
Assume that the only bank asset is the bond A above and the onlybank liability is the liability L above.
What happens to bank capital (also called net worth) if themarket yields decline by 100 basis points.
Bank capital declines TRUE OR FALSE (IS IT TRUE OR FALSE THATBANK CAPITAL DECLINES IN THIS SITUATION)
Answer & Explanation
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3.8 Ratings (388 Votes)
The givenstatement is FALSEAs a first step lets calculate the net worth in the as issituationWe
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