After interest rate and yield curve changes,a bank's market value of assets increased $4 million and the market value of its liabilities fell $6 million. The book value of equity ________ and the market value of equity ________.

Question

Quizplus · Accepted Answer

The book value of equity remains unchanged because it reflects the historical cost of assets and liabilities, not their market value. The market value of equity increased by $10 million because the assets increased by $4 million and liabilities decreased by $6 million, leading to a net increase in equity value in the market.

After Interest Rate and Yield Curve Changes,a Bank's Market Value