Bank of Baruch ($ million)

Assets: Liabilities:

91 day US Treasury bills $ 150m 1 year Certificates of Deposit $ 825m

2 year commercial loans $ 75m 5 year Bonds 70m

Fixed rate, 9% p.a. annually

10 year corporate loans-floating rate: Overnight Fed Funds 100m

LIBOR+50bp, semiannual roll date 91-day Commercial Paper 270m

$ 505m Equity 65m

10 year floating rate mortgages

quarterly roll dates $ 600m

Notes: Commercial paper is a pure discount instrument. The 5 year bonds pay 8.5% p.a. semiannually with a yield of 7.5% p.a. and have a duration of 4.2 years. The 1 year Certificates of Deposit pay 2.75% p.a. annually. All values are market values.

What is the impact on the banks equity values if interest rates decrease 50 basis points? (That is, DR/(1+R) is equal to a decline of 50 basis points.)