What is the effect of a 100 basis point increase in interest rates on the market value of equity of the FI? Use the duration approximation relationship. Assume r = 4 percent.
A)-27.56 million.
B)-28.01 million.
C)-29.85 million.
D)-31.06 million.
E)-33.76 million.

Question

Quizplus · Accepted Answer

The duration approximation relationship estimates the change in the market value of equity by using the formula: Change in Equity = -Duration * Change in Interest Rate * Initial Market Value. Given the options, the calculation aligns with a decrease of 29.85 million.

What Is the Effect of a 100 Basis Point Increase