1. An investment bank specializing in fixed-income assets has the following balance sheet (in millions). Amounts are in market values, and all interest rates are annual unless indicated otherwise.

Assets Liabilities and Equity Cash $ 0.50 5% 1-year Eurodollar deposits $ 5.0 8% 10-year Treasury notes semiannual (par value $16.0) 15.0 6% 2-year subordinated debt

(par  $10.0) 10.0 Equity 0.5 Total assets $ 15.5 Total liabilities and equity $15.5 Assume that the haircut for all assets is 15 basis points and for all liabilities, 25 basis points (per annum).