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Table 1: Duration of the ABC Bank's Assets and Liabilities Amount (S millions) Duration (years) Weighted Duration (years) 5 0.0 0.00 in 5 10 0.4 1.6 70 0.02 0.08 0.70 Assets Reserves and cash items Securities Less than 1 year 1 to 2 years Greater than 2 years Residential mortgages Variable-rate Fixed-rate (30-year) Commercial loans Less than 1 year 1 to 2 years Greater than 2 years Physical capital Average duration 10 10 0.5 6.0 0.05 0.60 15 10 25 3 0.7 1.4 4.0 0.0 0.11 0.14 1.00 0.00 2.70 viviu 2.0 0.1 1.0 0.32 0.01 0.16 Liabilities Checkable deposits Money market deposit accounts Savings deposits CDs Variable-rate Less than 1 year 1 to 2 years Greater than 2 years Overnight funds Borrowings Less than 1 year 1 to 2 years Greater than 2 vears Average duration 10 15 5 5 5 0.5 0.2 1.2 2.7 0.0 0.05 0.03 0.06 0.14 0.00 10 5 0.3 1.3 31 0.03 0.07 0.16 1.03 Table 2: Duration of the XYZ's Assets and Liabilities Amount (S millions) Duration (years) Weighted Duration (years) 3 0.0 0.00 5 1 1 0.5 1.7 9.0 0.05 10.02 0.09 50 20 13 Assets Cash and deposits Securities Less than 1 year 1 to 2 years Greater than 2 years Consumer loans Less than 1 year 1 to 2 years Greater than 2 years Physical capital Average duration Liabilities Commercial paper Bank loans Less than 1 year 1 to 2 years Greater than 2 vers Long-term bonds and other Long-term debt 0.5 1.5 3.0 0.0 0.25 0.30 0.45 0.00 1.16 40 0.2 0.09 3 03 15 0.01 0:04 0.19 4 Requirement: Which bank, in your opinion, has better interest rate risk management? Support your arguments, in detail, with figures and/or formula. You may define and explain different concepts involved in your arguments. Table 1: Duration of the ABC Bank's Assets and Liabilities Amount (S millions) Duration (years) Weighted Duration (years) 5 0.0 0.00 in 5 10 0.4 1.6 70 0.02 0.08 0.70 Assets Reserves and cash items Securities Less than 1 year 1 to 2 years Greater than 2 years Residential mortgages Variable-rate Fixed-rate (30-year) Commercial loans Less than 1 year 1 to 2 years Greater than 2 years Physical capital Average duration 10 10 0.5 6.0 0.05 0.60 15 10 25 3 0.7 1.4 4.0 0.0 0.11 0.14 1.00 0.00 2.70 viviu 2.0 0.1 1.0 0.32 0.01 0.16 Liabilities Checkable deposits Money market deposit accounts Savings deposits CDs Variable-rate Less than 1 year 1 to 2 years Greater than 2 years Overnight funds Borrowings Less than 1 year 1 to 2 years Greater than 2 vears Average duration 10 15 5 5 5 0.5 0.2 1.2 2.7 0.0 0.05 0.03 0.06 0.14 0.00 10 5 0.3 1.3 31 0.03 0.07 0.16 1.03 Table 2: Duration of the XYZ's Assets and Liabilities Amount (S millions) Duration (years) Weighted Duration (years) 3 0.0 0.00 5 1 1 0.5 1.7 9.0 0.05 10.02 0.09 50 20 13 Assets Cash and deposits Securities Less than 1 year 1 to 2 years Greater than 2 years Consumer loans Less than 1 year 1 to 2 years Greater than 2 years Physical capital Average duration Liabilities Commercial paper Bank loans Less than 1 year 1 to 2 years Greater than 2 vers Long-term bonds and other Long-term debt 0.5 1.5 3.0 0.0 0.25 0.30 0.45 0.00 1.16 40 0.2 0.09 3 03 15 0.01 0:04 0.19 4 Requirement: Which bank, in your opinion, has better interest rate risk management? Support your arguments, in detail, with figures and/or formula. You may define and explain different concepts involved in your arguments