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Suppose First National Bank holds $100 million in assets with an average duration of 4 years, and it holds $90 million in liabilities with an average duration of 3 years. Further suppose there is a 2-percentage-point increase in interest rates. Calculate the percentage decrease in First National Bank's net worth relative to the total original asset value.

A 2-percentage-point increase in interest rates decreases First National Bank's net worth by of the total original asset value. (Round your response to two decimal places.)

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Financial Management, Finance

Category:- Financial Management
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