a) calculate the duration gap for thr Tridos Bank? what is the change in the market value of thr networth as a percentage of assets if intrest rate rises from 2% to 3%? critically discuss how to manage liquidity gap

b) Assume that 15% of the bonds asset, consumer loans asset and commercial loans asset, 10% of thr demand deposits liability and 20% of the saving accounts liability are interest rate sensitive. Based on gao analysis , if ibterest rates increase by 50 basis points, what is the expected change in income ? what are the advantages and disadvantages of the gap analysis ?

Suppose Triodos Bank has the following assets and liabilities to manage (shown in Table 1). The current interest rate on the sensitive asset and liability is 2% per annum. Amy, a financial risk analyst, currently works at Triodos Bank. Her manager, Bob, asks her to assess the bond portfolio and relevant risks of bonds. Bob predicts that interest rate in the bond market will increase over the next six months. Relevant information concerning the bond portfolio is given in Table 2. Table 1. Triodos Bank assets and liabilities Duration Value (E million) Duration (in years) Asset Value (E million) 550 Liability Demand Deposits (in years) Bonds 350 7 2 580 Consumer Loans 450 1.5 Saving Accounts Commercial Loans 640 Equity Bank Capital 570 0 5 8 Suppose Triodos Bank has the following assets and liabilities to manage (shown in Table 1). The current interest rate on the sensitive asset and liability is 2% per annum. Amy, a financial risk analyst, currently works at Triodos Bank. Her manager, Bob, asks her to assess the bond portfolio and relevant risks of bonds. Bob predicts that interest rate in the bond market will increase over the next six months. Relevant information concerning the bond portfolio is given in Table 2. Table 1. Triodos Bank assets and liabilities Duration Value (E million) Duration (in years) Asset Value (E million) 550 Liability Demand Deposits (in years) Bonds 350 7 2 580 Consumer Loans 450 1.5 Saving Accounts Commercial Loans 640 Equity Bank Capital 570 0 5 8