Calculate GAP

(4)Suppose that you bank buys a T-bill yielding 4% that matures in 6-months and finances the purchase with a 3-month time deposit paying 3%. The purchase price of the T-bill is $3million financed with a $3 million deposit:

(a)Calculate the 6-month GAP associated with this transaction. What does this GAP measure indicated about interest rate risk in this transaction?

(b)Calculate the 3 month GAP associated with this transaction. Is this a better GAP measure of the banks risk? Why or why not?