managment of banks and other financial institutions

20 Citibank has reported the following balance sheet (in AED million): Assets Liabilities and equity Cash 30 Zero-coupon bonds Interbank lending 20 Interbank borrowing Loans (floating rate) 105 Certificates of deposit Consol (perpetual) bonds 65 Equity Total assets 220 Total liabilities and equity sd 130 20 220 The duration of the interbank lending and interbank borrowing is 0.36 year. The duration of floating-rate loans is 0.5 year. The duration of the certificates of deposit is 1.8 years. The interest rate (yield to maturity) on the consol bonds is 8%. The zero-coupon bonds have a maturity of 5 years. 1. What is the duration of the zero-coupon bonds? 2. What is the duration of the consol bonds? 3. Calculate the duration of Citibank's assets? 4. Calculate the duration of Citibank's liabilities? 5. What is Citibank's leverage-adjusted duration gap? What is its interest rate risk exposure? 6. What is the impact on the market value of equity if the relative change in all interest rates is an increase of 1 percent? Note that the relative change in interest rates is AR/(1+R) = 0.01