19

Hedge Row Bank has the following balance sheet (in millions):

Assets	$210	Liabilities	$189
		Equity	21
Total	$210	Total	$210

The duration of the assets is 7 years and the duration of the liabilities is 5 years. The bank is expecting interest rates to fall from 10 percent to 9 percent over the next year.

What is the duration gap for Hedge Row Bank

Select one:

a. 2.5 years

b. 3.1 years

c. 1.75 years

d. 2 years