FINA4600 - GAP management homework-REVISED 1. DDR National Bank uses dollar GAP management. The following is the banks balance sheet Rate Sensitive Assets (7596) Fixed Rate Assets (9.0%) 30,000 30,000 Rate Sensitive Liabilities (6.0%) Fixed Rate Liabilities (7.0%) 29,000 60,000 a. What is the bank's dollar GAP and its GAP Ratio? b. Calculate the bank's pretax profits. c. Recalculate pretax profits assuming a drop in interest rates of 0.5% (50 basis points). d. Now assume DDR anticipates the fall in interest rates and replaces $4,000 of RSA with an equal amount of FRA. (Use the yields as determined in part c.) Recalculate the dollar GAP and the pretax profits