The correct answer is A. The treasurer of a US bank is concerned about the potential impact of a 200 basis point (bps) increase in interest rates by the Federal Reserve on the bank's net worth. To assess this, the manager is asked to perform a duration analysis on the bank's assets and liabilities under this stress scenario.

The duration of the bank's assets and liabilities are calculated as follows:

• Duration of Assets (D Assets): $(400 \times 0 + 400 \times 1 + 600 \times 5 + 1100 \times 3) / 2500 = 2.68$ years.
• Duration of Liabilities (D Liabilities): $(1000 \times 0.5 + 1200 \times 4) / 2200 = 2.41$ years.

The effect of a 200 bps increase in interest rates on the bank's net worth is calculated by applying the duration concept to both assets and liabilities and then finding the difference:

• Change in Asset Value: $-(2.68 \times 0.02 \times 2500) / 1.02$
• Change in Liability Value: $(2.41 \times 0.02 \times 2200) / 1.02$

The net effect on the bank's net worth is the change in asset value minus the change in liability value: $-131.37 + 103.96 = -27.41$ million USD.

This calculation shows that a 200 bps increase in interest rates will cause the bank's net worth to decrease by approximately USD 27.4 million, making option A the correct statement. Option B is incorrect because it omits cash from the asset's duration calculation, leading to an inaccurate assessment. Options C and D are not relevant to the question's focus on the impact of interest rate changes on net worth.