(1) Fill in the blanks for FNB's capital and FCC's excess reserve.

(2) Does the income gap have the same sign as the duration gap in the case of the First National Bank, or do they have the opposite signs? Show calculations

(3) How about the signs of the Friendly Finance Company's income gap and the duration gap? Show calculations.

(4) How do you explain this phenomenon, in one or two sentences?

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*First National Bank: the duration of asset is 3 years, the duration of liabilities 1/2 years. *

Assets Liabilities Required Reserves 8 m Money Market Deposits 80 m Excess Reserves 2 m checking accounts 12 m T-bills 30 m capital ____m Mortgages 30-year 40 m Commercial Loans 5-year 20 m

*Friendly Finance Company: the duration of asset 1.5years, the duration of liabilities 2 years.*

Assets Liabilities Required Reserves 8 m Money Market Deposits 50 m Excess Reserves __ m 3-year CDs 40 m T-bills 65 m Capital 10 m

Commercial paper 10 m Mortgages 30-year 10 m