Rockford Bank Balance Sheet on December 31, 2021 PART A Assets Cash and Cash items Reserves at Fed Securities: Less than 1 year 1-2 years Greater than 2 years Residential mortgages: Variable-rate Fixed-rate (30 years) Commercial loans: Less than 1 year 1-2 years Greater than 2 years Building and Equipment Other Assets Total Assets Amount Duration ($ millions) (years) $6.00 5.00 41.00 3.00 8.00 30.00 15.00 50.00 33.00 23.00 12.00 1.00 $227.00 0.00 0.00 0.40 1.60 4.16 0.40 10.30 0.90 1.80 15.00 0.00 0.00 % wgt 2.643% 2.203% Wtd Avg Duration 0.000 0.000 18.062% 0.072 1.322% 0.021 3.524% 0.147 13.216% 0.053 6.608% 0.681 ISA 41.00 30.00 1.5 22.026% 0.198 50.00 14.537% 0.262 10.132% 1.520 5.286% 0.000 0.441% 0.000 100.000% 2.953 122.50 Liabilities Checkable deposits Money market demand accounts Savings deposits Certificates of deposit: Variable-rate Less than 1 year 1 -2 years Greater than 2 years Fed funds borrowed Borrowings: Less than 1 year 1 - 2 years Greater than 2 years Other liabilities Total Liabilities Equity Capital Total Liabilities and Equity ISGAP DGAP -$17.25 0.516923 Amount ($ millions) $9.00 8.00 20.00 50.00 21.00 13.00 4.00 15.00 40.00 9.00 32.00 1.00 $222.00 $5.00 $227.00 Duration (years) 1.00 0.80 1.00 0.90 0.30 1.80 8.00 0.01 0.40 1.20 12.00 0.00 % wgt Wtd Avg Duration ISL 4.054% 0.041 $1.35 3.604% 0.029 8.00 9.009% 0.090 4.4 22.523% 0.203 50.00 9.459% 0.028 21.00 5.856% 0.105 1.802% 0.144 6.757% 0.001 18.018% 0.072 4.054% 0.049 14.414% 1.730 0.450% 0.000 100.000% 2.491 15.00 40.00 $139.75 Suppose you decide to immunize the bank by issuing long-term debt of $30 million with a duration of X years and using those funds to make variable-rate residential mortgage loans with a duration of 0.50 years. a. What is the duration of the long-term debt that you must issue to bring DGAPK = 0? (0.2 pt.) b. Show the new balance sheet. (0.2 pt.) c. Now, what is your ISGAP? (0.2 pt.) d. Explain the pros and cons of this bank's action. (0.2 pt.)