Assume you are the manager of a bank with the following balance sheet. Determine the $GAP and duration GAP for the bank. What happens to the value or net income for the bank if interest rates go up or down?

1.Assets

Cash assets $15 M

Short Term investments (D=.35 years) $30 M

Long-term investments (D=5.0 years) $5M

Loans maturing in less than 1 year (D=.5 year) $25 M

Loans maturing in more than one year (D=10 years) $5 M

Total assets $80 M

2.Liabilities and Equity Capital

Demand Deposits $10 M

Interest-bearing deposits maturing in less than 1 year (D=.40 years) $10M

Interest-bearing deposits maturing in more than 1 year (D=2.5 years) $45M

Borrowed Funds (D=.25 years) $5m

Equity Capital $10m

Total liabilities and equity capital $80 M