Balance sheet of a bank is as follows:

.

Assets (in millions), Total Assets = $500

Cash $20 (rate: 0%, D=0)

Bonds $80 (rate: 7.2%, D=1.8 years)

Commercial loans $400 (rate: 11%, D=1.5 years)

.

Liabilities (Total Liabilities = $450) & Equity ($50) (in millions)

Small time deposits $100 (rate: 3.6%, D=4.0 years)

Large CDs $50 (rate: 6.3%, D=1.0 year)

Transaction accounts $300 (rate: 2.8%, D=3.3 years)

Equity $50

.

Duration of the asset portfolio is

1. 1.488 years.
2. 1.692 years.
3. 1.65 years.
4. 3.3 years
5. None of them is correct

Bank One has six-year zero coupon bonds with a total face value of $20 million. The current market yield on the bonds is 10 percent.

What is the price volatility if the maximum potential adverse move in yields is estimated at 20 basis points?

1. 1.09%
2. 5.45%
3. 0.2%
4. none of the above

The price volatility componentof DEAR for fixed-interest security is a product of

1. Modified duration and adverse move in yield
2. Price sensitivity of the position and the dollar market value of the position
3. the dollar market value of the position andtheadverse move in yield
4. all of them are correct