NatWest Bank's balance sheet is listed below. Market yields and durations (in years) are in parenthesis, and amounts are in millions.

AssetsLiabilities and Equity

Cash$20Demand deposits$250

Fed funds (1.05%, 0.02)150MMDAs (2.5%, 0.50)

T-bills (5.25%, 0.22)300(no minimum balance

requirement)360

T-bonds (7.50%, 7.55)200CDs (4.3%, 0.48)715

Consumer loans (6%, 2.50)900 CDs (6%, 4.45)1,105

C&I loans (5.8%, 6.58) 475Fed funds (1%, 0.02)515

Fixed-rate mortgages (7.85%, 19.50) 1,200Commercial paper (3%, 0.45)400

Variable-rate mortgages,Subordinated debt:

Re-priced @ quarter (6.3%, 0.25) 580Fixed-rate (7.25%, 6.65)200

Premises and equipment120Total liabilities$3,545Equity400

Total assets$3,945Total liabilities and equity$3,945

a. What is NatWest Bank's duration gap?

b. Use these duration values to calculate the expected change in the value of the assets and liabilities of NatWest Bank for a predicted increase of 1.5 percent in interest rates.