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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

  1. Bank Asset Bond ABank Liability L
    Settlement43643Settlement43643
    Maturity50948Maturity47296
    Rate10%Rate8%
    Yield9%Yield7%
    Redemption100Redemption100
    frequency2frequency2
    basis0basis0

    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 Solved by verified expert
3.8 Ratings (388 Votes)
The givenstatement is FALSEAs a first step lets calculate the net worth in the as issituationWe    See Answer
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