Section A Q1 Answer both parts of this question (a) The following is Bank Birkbeck's balance sheet. 1) What is Bank Birkbeck's interest rate risk exp w if any? (10 marks) ii) If all interest rates decline 90 basis points, what will be the impact on the market value of Bank Birkbeck's equity? Assets Amount Rate Duration Cash 75 million 750 million 175 million 12 percent 9 percent O years 1.75 years 7.00 years Treasures Liabilities and Equity Time Deposits 350 million 575 million 75 million 7 percent 8 percent 1.75 years 2.50 years CDs Equity (7 marks) (b) Evaluate the need for effective interest risk management within a bond portfolio (8 marks) (continued Students are required to attempt 2 questions from each section and 4 questions in total. Section A Q1 Answer both parts of this question (a) The following is Bank Birkbeck's balance sheet. i) What is Bank Birkbeck's interest rate risk exposure, if any? (10 marks) ii) If all interest rates decline 90 basis points, what will be the impact on the market value of Bank Birkbeck's equity? Rate Assets Cash Amount 75 million 750 million 175 million Duration O years 1.75 years 7.00 years Loans 12 percent 9 percent Treasuries Liabilities and Equity Time Deposits 1.75 years 350 million 575 million 75 million 7 percent 8 percent CDs 2.50 years Equity (7 marks) (b) Evaluate the need for effective interest risk management within a bond portfolio (8 marks) (continued