The balance sheet for Gotbucks Bank Inc. (GBI) is presented below ($ millions).

Assets Liabilities and Equity Cash Federal funds Loans (floating)

Loans (fixed)

$ 30 20 105 65 Core deposits Federal funds Euro CDs Equity

$ 20 50 130 20 Total assets $220 Total liabilities and equity $220

a. What is the duration of the fixed-rate loan portfolio of Gotbucks Bank?

b. If the duration of the floating-rate loans and fed funds is 0.36 year, what is the duration of GBI’s assets?

c. What is the duration of the core deposits if they are priced at par?

d. If the duration of the Euro CDs and fed funds liabilities is 0.401 year, what is the duration of GBI’s liabilities?

e. What is GBI’s duration gap? What is its interest rate risk exposure?

f. What is the impact on the market value of equity if the relative change in all interest rates is an increase of 1 percent (100 basis points)? Note that the relative change in interest rates is Δ R /(1  R ) 0.01.
g. What is the impact on the market value of equity if the relative change in all interest rates is a decrease of 0.5 percent (50 basis points)?
h. What variables are available to GBI to immunize the bank? How much would each variable need to change to get DGAP to equal zero?