Assume Bank One has the following balance sheet items in millions of dollars: Rate sensitive Asset $20m Rate sensitive Liabilities $50m Fixed Rate Assets $80m Fixed Rate Liablities $40m Capital $10m Also assume the duration of the assets is 2 years and that of its liabilities is 3 years. Assume that interest rates are initially 3%.

1.- What is the income gap for the bank?

2.- If the bank sells $10M of its fixed rate assets and replaces them with rate sensitive assets. What is the income gap for the bank?