The average duration of the loans is 10 years. The average duration of the deposits is 3 years.

consumer loans $50 mil Deposit $235 Mil

Commercial loans $200 Mil Equity $15 mil

total assets $250 mil Total liabilities and equity $250 Mil

What is the change in the value of the FI's equity for a 1 percent increase in interest rates from the current rates of 10 percent (i.e., R = +0.01, and 1 + R = 1.10)?

Question 2

The maximum potential loss to a buyer of bond put options is limited to the premium paid.

True

False