Assume that you are a bank that owns 4250 bonds with the following in- formation: Face Value ($1000), yield-to-maturity (or market interest rate for comparable investments) (3.5%), coupon rate (6%), maturity (3 years).

a) What is the market value of this bond portfolio that the bank should record on its balance sheet?

b) What happens to the price of the bond when the market interest rate on a comparable investment changes to 5%?

c) Is there any change to the value of the bank's assets?

d) Using a T-account, show what happens to the bank's balance sheet when the interest rate increases to 5%.