BAS Case Study - March 2023

APPENDIX G – ECONOMIC VALUE OF EQUITY EXAMPLE ILLUSTRATION

Management gets to pick the duration of non-maturity deposits.

+400 bps

ASSETS Very long term; Duration = 6 years

LIABILITIES Reasonable duration of 3.5 years.

Interest Rates

Economic Value

1

2

3

4

5

6

7

8

Duration (years)

ECONOMIC VALUE OF EQUITY RESULTS Base Case +400 Assets 100 76 Liabilities 85 71 Equity 15 5 % Change - < 67% >

The percentage decline in economic value for each category corresponds to its duration. E.g. if duration of assets is 6 years, economic value would be expected to change about 6% for every 1% change in interest rates.