QUESTION 2 (20 marks) SECTION B Answer TWO (2) questions from this SECTION. Parish Bank's balance sheet is listed below. Market yields and durations (in years) are in parenthesis, and amounts are in millions. Assets Liabilities and Equity Cash Treasury Bills (4.50%, 0.5) 225 25 Certificate of Deposits (6.50%, 1.25) 280 90 Federal Funds (3.75%, 0.10) 110 Treasury Bonds (6.75%, 3.0) 15 Commercial Paper (6.75%, 0.45) 40 Loans Floating Rate (7.25%, 0.35) 150 Total Liabilities 430 Loans Fixed Rate 200 Equity 50 Total Assets 480 Total Liabilities and Equity 480 Additional Information - Fixed rate loans have four-year maturities which are priced at par, and pay 9.00% annual interest. The principal on these loans is repaid at maturity. a) b) c) d) (Ke) Briefly discuss the Duration Model as a means to measure interest rate risk. (2 marks) Calculate the duration of the fixed-rate loan portfolio of Parish Bank. Round your answer to two (2) decimal places. (8 marks) Calculate the overall duration of the assets of Parish Bank. Round your answer to two (2) decimal places. (2 marks) Calculate the overall duration of the liabilities of Parish Bank. Round your answer to two (2) decimal places. (2 marks) Calculate the impact on the market value of equity of Parish Bank if the relative change in all interest rates is an increase by 1 percent (100 basis points) (6 marks)