What is the change in the value of its assets if all interest rates decrease by 1 percent?
A)Approximately $1.613 million.
B)Approximately $2.297 million.
C)Approximately -$1.937 million.
D)Approximately $2.209 million.
E)Approximately $2.524 million.

Question

Quizplus · Accepted Answer

To calculate the change in value of assets due to a decrease in interest rates, we need to use the duration of assets formula. 
Change in asset value = - Duration x Initial asset value x Change in interest rate
Plugging in the values, we get:
-2.3 x $100 million x (-0.01) = $2.3 million
Therefore, the change in the value of assets would be approximately $2.297 million. Option B is the closest answer.

What Is the Change in the Value of Its Assets