Bank ABC has the following 2 bond-like loans: 

Loan 1: $1m loan fixed for 3 years at 10% 

Loan 2: $1m loan fixed for 5 years at 12% 

I. a) The market interest rate is now at 5%. The duration of the bank’s loan portfolio is _____ years. 

b) If the market interest rate increases by 1% now, the percentage change of the present value of the portfolio would be ____ percent. 

 2. ABC has $1.5m of liabilities (at market value) with a duration of 2.68 years. The value of the bank change due to the change in interest rate would be $____ thousand.