The balance sheet (book value) of Hedge Row Bancorp (in millions) is provided below:

ASSETS LIABILITIES AND EQUITY

Cash (non-interest earning) $10.0 Demand deposits (one-year maturity $70.0

Short-term consumer loans 140.0 Demand deposits (two-year maturity 40.0

(one-year maturity)

Long-term consumer loans 150.0 Three-month Certificate of deposits 140.0

(two-year maturity) (CDs)

Three-month Treasury Bills 145.0 Three-month Bankers Acceptances 100.0

Six-month Treasury Notes 110.0 Six-month Commercial Paper 155.0

Five-year Treasury Bond 85.0 One-year time deposits 195.0

10-year, fixed-rate mortgages 120.0 Two-year time deposits 170.0

30-year, floating-rate mortgages 230.0 Equity capital (fixed) 120.0

(rate adjusted every nine months)

$990.0 $990.0

a). Calculate the cumulative one-year repricing gap (CGAP) for Hedge Row Bancorp.

b). Based on the answer from a) explain which risk Hedge Row Bancorp would be exposed to.

c). Calculate the cumulative one-year impact on net interest income of Hedge Row Bancorp of a 1 % (125 basis points) increase in interest rates on both rate sensitive asssets and rate sensitive liabilities.

d). The weighted-average Duration of the assets of Hedge Row Bancorp is calcuated at 3.6 years, while the weighted-average Duration of its liabilities is calculated at 2.8 years. The market values of the assets are estimated to be $1,000 (million), while the market value of the liablitites equate to the book value. With interest rate expected to rise from 9% to 10%, calculate the potential impact of to the market value of the equity of Hedge Row Bancorp.