Use the data provided for Gotbucks Bank Inc. to answer this question.

Gotbucks Bank Inc. (dollars in millions)

Assets Liabilities and Equity Cash $ 30 Core deposits $ 20 Federal funds 20 Federal funds 50 Loans (floating) 105 Euro CDs 130 Loans (fixed) 65 Equity 20 Total assets $220 Total liabilities and equity ____

$220 Notes to the balance sheet: Currently, the fed funds rate is 8.5 percent. Variable-rate loans are priced at 4 percent over LIBOR (currently at 11 percent). Fixed-rate loans are selling at par and have five-year maturities with 12 percent interest paid annually. Core deposits are all fixed rate for two years at 8 percent paid annually. Euro CDs currently yield 9 percent. (LG 23-3)

a. What is the duration of Gotbucks Bank’s (GBI) fixedrate loan portfolio if the loans are priced at par?

b. If the average duration of GBI’s floating-rate loans (including fed fund assets) is 0.36 year, what is the duration of the bank’s assets? (Note that the duration of cash is zero.)

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

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

e. What is GBI’s duration gap? What is its interest rate risk exposure? If all yields increase by 1 percent, what is the impact on the market value of GBI’s equity? (That is, ΔR/(1 + R) = 0.01 for all assets and liabilities.)AppendixLO1