Assets*
	Amount (RM million)	Proportion /Weight	Estimated average maturity	Estimated duration
Short-term loans	400	0.4	1.5 years	1 year
Medium-term loans	200	0.2	4.0 years	3 years
Long-term loans	400	0.4	25 years	20 years
Total assets	1,000
Liabilities*
	Amount (RM million)	Proportion /Weight	Estimated average maturity	Estimated duration
Current accounts	400	0.4	0	-
Saving accounts	200	0.2	1.5 years	1 year
Fixed deposits	400	0.4	5	4 years
Total liabilities	1,000
				a.

c. The duration gaps.

Duration of assets [(Liabilities / assets) x duration of liabilities]

= 9 - [ (600 / 1,000) x 1.8]

= 9 1.08

= 7.92

d. Percentage (%) change in value of assets (assume the current interest rate is 10% and increases by 5% to 15%).

- Duration of assets x [Change in interest rates / (1 + interest rate)]=

= - 9 x [ 0.05 / (1 + 0.1)]

= - 9 x 0.04545

= - 0.40905

e. Percentage (%) change in value of liabilities (assume the current interest rate is 10% and increases by 5% to 15%).

- Duration of liabilities x [Change in interest rates / (1 + interest rate)]

= - 1.8 x [ 0.05 / (1 + 0.1)]

= - 1.8 x 0.04545

= - 0.8181

f. Percentage (%) change in net worth (assume the current interest rate is 10% and increases by 5% to 15%).

- Duration of gap x [Change in interest rates / (1 + interest rate)]

= - 7.92 x 0.04545

= - 0.36

Based on your answers for c. to f. above, how will a 5% increase in interest rates affect the banks financial standing?(5marks)