TABLE 1 Duration of the Example Bank's Assets and Liabilities Duration Years) Assets Reserves & Cash Items Securities Less than 1 year 1 to 2 years Greater than 2 years Residential Mortgages Variable Rate Fixed Rate (30 years) Commercial Loans Less than 1 year 1 to 2 years Greater than 2 years Physical Capital Average Duration Liabilities Checkable Deposits Money Mkt Deposit Accounts Saving Deposits CDs Variable Rate Less than 1 year 1 to 2 years Greater than 2 years Fed Funds Borrowings Less than 1 year 1 to 2 years Greater than 2 years Average Duration Amount (S Millions) 5 1 4 12 13 5 11 9 20 5 4 4 12 11 13 4 2 6 14 5 5 | | | | |/|| 0.4 1.5 2.9 Weighted Duration (Years) Table 1 shows the amounts and durations of the Example Bank's assets and liabilities. The bank manager wants to know: a) What is the average duration of assets and liabilities? (Fill in the Table1) b) What happens to assets and liabilities when interest rates rise from 8% to 12%? c) What is the duration gap for the Example Bank? d) Using the duration gap analysis, find the change in the market value of net worth as a percentage of assets if interest rates rise from 8% to 12%. e) Suppose the bank manager wants to immunize completely the market value of the bank's net worth from interest-rate risk. How can he do that? What are the results, show the calculations and explain?