The following are the numbers extracted from Monash bank ($ millions): Assets: Cash $30, lending to local banks $20, Loans (floating rate) $105, loans (fixed rate) $65, total assets = $ 220 Liabilities: Core deposit $20, Borrowing from local banks $50, Certificate of deposits $130, Equity $20, total liabilities and Equity = $ 220 Additional information and notes to the balance sheet. Assets: The lending rate to local banks is 8 per cent (Duration = 0.40 years) The floating loan rate is (BBR+4 per cent), and currently BBR is 11 per cent. (Duration = 0.40 years) Fixed rate loans have five-year maturities, are priced at par, and pay 12 per cent annual interest. The principal is repaid at maturity. Liabilities: Core deposits are fixed rate for two years at 8 per cent paid annually. The principal is repaid at maturity. The core deposit are priced at par. Borrowing from local banks (Duration=0.45 years) Certificate of deposits currently yield 9 per cent. (Duration=0.45 years) Based on the balance sheet numbers and the information above: 1) What is the duration of Monash bank's assets? (3 marks) 2) What is the duration of Monash bank's liabilities? (3 marks) 3) What is Monash bank's duration gap? (2 marks) 4) What is the impact on the market value of equity if the relative change in all interest rates is an increase of 1 per cent (100 basis points)? Note that the relative change in interest rates is A R/(1+R) = 0.01. (2 marks) 5) What variables are available to Monash bank to immunise the bank? How much would each variable need to change to get DGAP equal to zero? (2 marks) The following are the numbers extracted from Monash bank ($ millions): Assets: Cash $30, lending to local banks $20, Loans (floating rate) $105, loans (fixed rate) $65, total assets = $ 220 Liabilities: Core deposit $20, Borrowing from local banks $50, Certificate of deposits $130, Equity $20, total liabilities and Equity = $ 220 Additional information and notes to the balance sheet. Assets: The lending rate to local banks is 8 per cent (Duration = 0.40 years) The floating loan rate is (BBR+4 per cent), and currently BBR is 11 per cent. (Duration = 0.40 years) Fixed rate loans have five-year maturities, are priced at par, and pay 12 per cent annual interest. The principal is repaid at maturity. Liabilities: Core deposits are fixed rate for two years at 8 per cent paid annually. The principal is repaid at maturity. The core deposit are priced at par. Borrowing from local banks (Duration=0.45 years) Certificate of deposits currently yield 9 per cent. (Duration=0.45 years) Based on the balance sheet numbers and the information above: 1) What is the duration of Monash bank's assets? (3 marks) 2) What is the duration of Monash bank's liabilities? (3 marks) 3) What is Monash bank's duration gap? (2 marks) 4) What is the impact on the market value of equity if the relative change in all interest rates is an increase of 1 per cent (100 basis points)? Note that the relative change in interest rates is A R/(1+R) = 0.01. (2 marks) 5) What variables are available to Monash bank to immunise the bank? How much would each variable need to change to get DGAP equal to zero? (2 marks)