Asset and Liability Management: The Banker’s Guide to Value Creation and Risk Control, Second Edition

Solution to Stage Fifteen

1.	Economic value = value of assets – value of debt = 100 – 95 = 5
2.	Change in economic value of equity: In this exercise, an increase in interest rate of 2% would completely destroy the economic value of equity of the bank, meaning that the value of assets would no longer cover the value of deposits.