question archive A firm has a duration of assets D A = 3

A firm has a duration of assets D A = 3

Subject:FinancePrice: Bought3

A firm has a duration of assets D A = 3.5 years, duration of liabilities D L = 0.90 years, and leverage ratio k = 85%. Assets are equal to $2,300 million. According to the duration gap model, what size interest rate change would make the institution insolvent if rates are currently 5.5 percent?

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