Use the following information for Bank of Coppell (BOC) for the next three questions:
Duration (Assets) = 5; Duration(Liabilities) = 2; Assets = 200 million; Liabilities = 175 million
The current interest rate is 5%.
1. If the interest rate goes up from 5% to 6%, the market value of assets drops by how much based on the duration of assets?
-$9.52m
-$9.76m
-$10.25m
-$11.57
-$12.29
2. If the interest rate goes up from 5% to 6%, the market value of liabilities drops by how much based on the duration of liabilities?
-$3.33m
-$4.42m
-$4.67m
-$5.23m
-$5.67m
3. If the interest rate goes up from 5% to 6%, the net worth of the bank declines by how much based on the durations of assets and liabilities?
-$4.01m
-$4.21m
-$5.34m
-$6.19m
-$6.34m