Fraser Bank has the following balance sheet:

Assets

Liabilities

Reserves

$10m

Deposits

$90m

Loans

$80m

Borrowings

$20m

Securities

$30m

Capital

$10m

1. The bank manager estimates the average duration of assets to be 6 years, and average duration of liabilities to be 2 year. Now market interest rate rises from 1.5% to 4.5%. How would this bank'snet worthchange? Show your calculation for full mark. (Round your answer to 2 decimal places.)
2. Suppose the bank's rate-sensitive assets are $30m, and rate-sensitive liabilities are $60m. What will happen to itsprofitwhen the market interest rate rises from 1.5% to 4.5%? Show your calculation for full mark. (Round your answer to 2 decimal places.)
3. Suppose the ROA is 3%. Calculate the ROE.
4. Suppose the desired reserve ratio is 10%. The bank manager decides to use up all excess reserves to buy Canada bonds. Write down the new balance sheet after this transaction. (Note: this is not a T-account analysis; you need to show the WHOLE balance sheet.)