County Bank has the following market value balance sheet (in millions, all interest at annual rates). All

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County Bank has the following market value balance sheet (in millions, all interest at annual rates). All securities are selling at par equal to book value.

Assets Liabilities and Equity Cash $ 20 Demand deposits $100 15-year commercial loan at 10% interest, balloon payment 160 5-year CDs at 6% interest, balloon payment 210 30-year mortgages at 8% interest, balloon payment 300 20-year debentures at 7% interest, balloon payment 120 Equity 50 Total assets $480 Total liabilities and equity $480

a. What is the maturity gap for County Bank?

b. What will be the maturity gap if the interest rates on all assets and liabili- ties increase 1 percent?

c. What will happen to the market value of the equity? LO.1

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