If Fifth National Bank's asset duration exceeds its liability duration and if interest rates rise,the bank's net worth will _________________.
A)decrease
B)increase
C)stabilize
D)be unaffected
E)None of the options is correct.

Question

Quizplus · Accepted Answer

If Fifth National Bank's asset duration exceeds its liability duration and interest rates rise, the value of its fixed-rate assets will decline more rapidly than the value of its fixed-rate liabilities. This will lead to a decrease in net worth.

If Fifth National Bank's Asset Duration Exceeds Its Liability Duration