a. Calculate the leverage-adjusted duration gap of an FI that has assets of $2.2 million invested in 25-year, 10 percent semiannual coupon Treasury bonds selling at par and whose duration has been estimated at 10.06 years. It has liabilities of $1,020,000 financed through a two-year, 6.25 percent semiannual coupon note selling at par. b. What is the impact on equity values if all interest rates fall 20 basis pointsthat is, R/(1 + R/2) = 0.0020?

a. Leveraged adjusted duration gap _____ years

b. Change in net worth using leveraged adjusted duration gap