All securities are selling at par equal to book value. The two-year notes are yielding 5 percent, and the 15-year munis are yielding 9 percent. The one-year commercial paper pays 4.5 percent, and the five-year notes pay 8 percent. All instruments pay interest annually

a. Calculate the values of all four securities of Gunnison Insurances balance sheet assuming that all interest rates increase 2 percent. What is the dollar change in the total asset and total liability values? What is the percentage change in these values?

b. What is the dollar impact on the market value of equity for Gunnison? What is the percentage change in the value of the equity?

Assets2-yearTreasurynote15-yearmunisTotalAssets$175$165$340LiabilitiesandEquity1-yearcommercialpaper5-yearnoteEquityTotalLiabilities&Equity$135$160$45$340