The balance sheet for Corsair Bank (CB) , is as follow:

Assets (USD millions)		Liabilities and Equity (USD millions)
Cash	30	Deposits	20
Treasury bills	20	Short Term Debts	50
Floating rate loans	105	Certificate of Deposits (CDs)	130
Fixed rate loans	65	Equity	20
Total assets	$220	Total liabilities and equity	$220

The treasury bills rate is 8.5 percent, the floating loan rate is BLR + 4 percent, and currently BLR is 11 percent. Fixed-rate loans have five-year maturities, are priced at par, and pay 12 percent annual interest. The loans principal is repaid at maturity. Deposits are fixed rate for two years at 8 percent paid annually. The deposits principal is repaid at maturity. Investors required yield is 9 percent.

Requirements:

1. Calculate the duration of the fixed-rate loan portfolio of CB.

b) If the duration of the floating-rate loans and treasury bills is 0.36 year each, compute the duration of CBs assets.

c) Measure the duration of the core deposits if they are priced at par.

d) If the duration of the CDs and short-term debts is 0.401 year each, calculate the duration of CBs liabilities.

e) Identify CBs duration gap. Explain the interest rate risk exposure if market interest rate increase or decrease.

f) Analyze the impact on the market value of equity if the relative change in all interest rates are as follows:

(i) Increase 1 percent (100 basis points)

(ii) Decrease 0.5 percent (-50 basis points)

h) Discuss the variables that are available to CB to immunize the bank. Measure how would each variable need to change to get DGAP to equal zero.