Question 2 (20 marks) (a) What is the tradeoff between liquidity and profitability? What other risk that the bank will encounter if the bank has reduced its liquidity? (5 marks) (b) A Treasury bond currently carries a yield to maturity of 7 percent and a market price of RM1161.68. If the bond promises to pay RM100 in interest annually for five years, what is its current duration? Assuming Bank Niaga holds RM15 million in this bond and having a similar duration If interest rates suddenly rise from 6 percent to 7 percent, what percentage change should occur in the bonds' market price? (15 marks) natinn 2 www