QUESTIONS A financial institution has the following market value balance sheet structure: Assets Liabilities and Equity Cash $3,500 Certificate of deposit $50,000 Bond $50,000 Equity $3,500 Total assets $53,500 Total liabilities and equity $53,500 Hints: Similar to Q2 in "Sample Calculation Problems_Cho7.pptx". (1) The bond has a 10-year maturity, a fixed-rate coupon of 10% paid at the end of each year, and a par value of $50,000. The certificate of deposit has a 1-year maturity and an 8% rate of interest. The Fl expects no additional asset growth. What will be the net interest income at the end of the first year? (2 points) (2) If at the end of year 1 market interest rates have increased 100 basis points (1%), what will be the net interest income for the second year? Is this result caused by reinvestment risk or refinancing risk? (2 points) (3) Assuming that market interest rates increase 1%, what will be the value of the bond at the end of year 1? What will be the market value of the equity for the Fl? (3 points) (4) If market interest rates had decreased 100 basis points by the end of year 1, what will be the value of the bond at the end of year 1? What will be the market value of the equity for the FI? (3 points)