d) According to the Basel 1 capital requirements, is the bank aley 4. Draw the payoff diagrams for purchaser and seller of a call option. (3 marks) 5. Suppose a bank has an average asset duration of 3.78 years and an average liability duration of 2.14 years. Its liabilities amount to $100 million, while its assets total $120 million. Assume that interest rates were 5 percent and then rise to 7 percent. What is the duration gap, and what will happen to the value of the bank's net worth as a result of this increase in interest rates? (3 marks) 6. Sun Manufacturing Company is negotiating a loan with AUS Bank, in order to purchase raw material. Sun can offer only its current inventory and account receivables as collateral. The bank loan officer advises Sun that based on current market values of offered types of collateral you are likely to receive a loan ranging between $1.5 million and $3.5 million. Under the guideline for collateral, estimate the current market value of inventory and the current market value of account receivables of Sun Company. (2 marks) 2 d) According to the Basel 1 capital requirements, is the bank aley 4. Draw the payoff diagrams for purchaser and seller of a call option. (3 marks) 5. Suppose a bank has an average asset duration of 3.78 years and an average liability duration of 2.14 years. Its liabilities amount to $100 million, while its assets total $120 million. Assume that interest rates were 5 percent and then rise to 7 percent. What is the duration gap, and what will happen to the value of the bank's net worth as a result of this increase in interest rates? (3 marks) 6. Sun Manufacturing Company is negotiating a loan with AUS Bank, in order to purchase raw material. Sun can offer only its current inventory and account receivables as collateral. The bank loan officer advises Sun that based on current market values of offered types of collateral you are likely to receive a loan ranging between $1.5 million and $3.5 million. Under the guideline for collateral, estimate the current market value of inventory and the current market value of account receivables of Sun Company. (2 marks) 2