3. Refer to First National Bank's balance sheet with durations. Assume all values are market values. Duration of First National Bank's Assets | Amount ($ millions) | Duration (years) Reserves and cash items 00 Securities: Less than 1 year 0.4 1 to 2 years 1.6 Greater than 2 years 70 Residential Mortgages Variable rate 0.5 Fixed rate (30 year) 6.0 Commercial loans Less than 1 year 0.7 1 to 2 years 1.4 Greater than 2 years Duration of First National Bank's Liabilities Amount ($ millions) Duration (years) Checkable deposits 15 2.0 Money market deposit accounts 0.1 Savings deposits 1.0 CDs: Variable-rate 0.5 Less than 1 year 0.2 1 to 2 years 1.2 Greater than 2 years 2.7 Fed Funds 0.0 Borrowings: Less than 1 year 0.3 1 to 2 years 5 1.3 Greater than 2 years 5 | 3.1 Find the weighted average duration of assets and liabilities. Assume the average interest rate (R) is 10% for this bank's assets and liabilities in other words, use 0.1 as R in the formula). Now assume a radical increase in all rates of 5%. Using the duration gap formulas presented in class, find the change in the value of equity using the leverage adjusted duration gap