1. Consider a bank with 10M in shareholder equity. It has assets and liabilities according to the following table:

Assets	Liabilities
Rate Sensitive Assets 100M	Rate Sensitive Liabilities 75M
Fixed Rate Assets 75M	Fixed Rate Liabilities 100M

Suppose the average duration of assets is 3 years, and the average duration of liabilities is 4 years.

1. If the interest rate changes by 2%, what is the banks new shareholder equity? (hint: use duration analysis to find the change in the banks net worth)
2. Does the bank remain solvent?
3. What is the change in the banks profits according to gap analysis?