PNM Bank has the followings balance sheet and additional information.

1. Find McCauley duration of 6-year T-bond. (2 marks)

2. Find the banks duration gap. (2 marks)

3. What is the banks expected economic net interest income? (2 marks)

4. If the interest rate falls by 1% for all assets and liabilities, what is the approximate expected change in the economic value of equity? (4 marks)

5. What is the effective duration of equity when the interest rate changes by 1%? (1 mark)

6. How to immunize this portfolio? Explain with necessary calculation at least two ways. (4 marks)