2. Bank XYZ has the following market value balance sheet (expressed in millions of dollars): Assets Short Term Loans Long-Term Loans 1000 500 Liabilities 5-year CDs Net Worth 1350 150 The short-terms loans are zero coupon and repaid at the end of 1 year. The Long-term loans are zero coupon loans that mature in 3 years. On the liability side, the 5-year CDs are also zero coupon. Assume that the yield curve is flat and interest rates are 5% today. Suppose you want to duration hedge the bank's equity by buying a 10-year Treasury STRIP financed with overnight borrowing in the interbank market. How would you hedge against a 1% increase in interest rates using STRIPS? a) Long 425 million b) Short 425 million c) Long 500 million d) Short 500 million e) Long 375 million