i. Assume current market yield is flat at 6.5% p.a. Calculate the duration gap of the bank.

ii. Using the duration gap estimated from question i, what will happen to the net worth of the bank if the market yield goes up by 1.5%p.a.?

Asset Liability 250 5 year semi-annual 6.45%pa coupon 250 6 months treasury bills bond 10 year 3.5% annual coupon bond 100 3 year semi annual coupon 5.50% bond 200 350 6 year annual coupon (6.30%pa) bond 200 10 year treasury bond 7.5% semi annual coupon 50 Equity 700 700 Asset Liability 250 5 year semi-annual 6.45%pa coupon 250 6 months treasury bills bond 10 year 3.5% annual coupon bond 100 3 year semi annual coupon 5.50% bond 200 350 6 year annual coupon (6.30%pa) bond 200 10 year treasury bond 7.5% semi annual coupon 50 Equity 700 700