If he were that kind of hands-on manager, this mess might not have happened in the first place.
The real risk-free rate is 4%. 1. The real risk-free rate is 4%. Inflation is expected to be 3% this year and 5% during the next 2 years. Assume that the maturity risk premium is zero.
Interest rate risk (IRR)âthe potential for changes in interest rates to reduce a bankâs earnings or economic valueâis inherent to banking. However, too much IRR can leave bank capital and earnings vulnerable, particularly for those financial institutions in a weakened financial condition.