Q2. A financial institution has the following market value balance sheet: Assets Cash Bond Total Liabilities and Equity $2,000 Certificate of deposit $20,000 $20,000 Equity $2.000 $22.000 Total $22.000 a. The bond has a 10-year maturity, $10,000 par value, and a fixed-rate coupon of 12 percent. The certificate of deposit has a 1-year maturity and 8 percent fixed rate of interest. What will be the net interest income (NII) at the end of the first year? b. If at the end of year 1 market interest rates have increased 1 percent, what will be the net interest income for the second year? Is the change in NII caused by reinvestment risk or refinancing risk? c. Assuming that market interest rates increase 1 percent, the bond will have a value of $9,445 at the end of year 1. What will be the market value of the equity for the FI? d. If market interest rates had decreased 1 percent by the end of year 1, would the market value of cquity be higher or lower than $2,000? Why