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Question
If the relative change in interest rates is a decrease of 1 percent, calculate the impact on the bank's market value of equity using the duration approximation.
(That is, ΔR/(1 + R) = -1 percent)
A. The bank's market value of equity increases by $325,550.
B. The bank's market value of equity decreases by $325,550.
C. The bank's market value of equity increases by $336,500.
D. The bank's market value of equity decreases by $336,500.
E. There is no change in the bank's market value of equity.
Answer
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