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2. Explain duration GAP analysis in banks. Calculate the duration Gap of the following excerpts from the balance sheet of a bank Also calculate

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2. Explain duration GAP analysis in banks. Calculate the duration Gap of the following excerpts from the balance sheet of a bank Also calculate the impact on the equity ofthe bank in the different interest rates scenarios. Balance Sheet for Hypothetical Bank articulars Current Assets F ixed Assets Assets 1000 300 1300 Duration 7 years Current Liabilities Other Liab Equity Liabilities 700 300 300 1300 Du ratio 5 Years Scenarios for Impact analysis: l. Interest rates increased by 1% 2. Interest rates decreased by 1% (10 Marks)

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