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Suppose your bank buys $5 million in T-bonds maturing in 3 years that yields 3 percent p.a. and finances this purchase with $5million in 2

Suppose your bank buys $5 million in T-bonds maturing in 3 years that yields 3 percent p.a. and finances this purchase with $5million in 2 year term deposits paying 1.5 percent p.a.

(i)Calculate the 3-year repricing GAP(0.5 marks)

(ii)Calculate the 2-year repricing GAP (0.5 marks)

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