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Assume you have the following asset and liability in your Balance Sheet: Asset - Bond A Modified Duration = 2.6 years Value = RM1.5 million

Assume you have the following asset and liability in your Balance Sheet:

Asset - Bond A

Modified Duration = 2.6 years

Value = RM1.5 million

Liability - Bond B

Modified Duration = 3.1 years

Value = RM1.0 million

a. Calculate the duration gap. (5 marks)

b. What is the expected change in Net Worth if interest increases by 1%? (5 marks)

c. What should or could you to achieve immunised balance sheet? (5 marks)

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