Problem 3: Liability Risk - Calculating and Using Duration GAP (25%) . Michael Bank's balance sheet is listed below. Corresponding market yields and durations (in years) are in parenthesis, and amounts are in millions. 250 360 Assets Liabilities and Equity Cash 20-Demand deposits Fed funds (5.05%, 0.02) 150 MMDAs (4.5%, 0.50) T-bills (5.52%, 0.22) 200+ (no minimum balance requirement) C&I loans (5.8%, 6.58) 475.CDs (4.3%, 0.48) Fixed-rate mortgages (7.85%, 18.50) 1,200 Fed funds (5%, 0.02) Variable-rate mortgages, 580 Subordinated debt: repriced @ quarter (6.3%, 0.25) 40 Fixed-rate (7.52%, 5.56) Premises and equipment 120 Total liabilities e Equity Total assets $2,745 Total liabilities and equity 665 920 200 $2,395 350 $2,745 a. What is Michael Bank's leverage adjusted DGAP? Illustrate your calculation. (10%) b. Use these duration values to calculate the expected change in the value of the assets and liabilities of Michael Bank for the predicted increase of 1.55% in interest rates. Please illustrate clearly on the change on each items on the asset and liability side.(10%) c. What is the change in equity value forecasted from the duration values for the predicted increase in interest rates of 1.55%? (Note: Use your findings in part (b).) (5%)