1. Suppose that the present value of the liabilities of a financial institution is $600 million, and the equity is $800 million. The duration of the liabilities is equal to 5. Suppose further that this financial institution's assets include only bonds, and the duration for the assets is 6. Answer the following questions.

(1) What is the market value of the assets?

(2) What does a duration of 6 mean for the assets if the yield increases by 100 basis points?

(3) What does a duration of 5 mean for the liabilities if the yield decreases by 100 basis points?

(4) Suppose interest rates increase by 50 basis points; what will be the approximate new value for the equity? The current yield is 10%.

(5) Suppose interest rates decrease by 50 basis points; what will be the approximate new value for the equity? The current yield is 10%.