The following balance sheet information is available for McCaslin State Bank (amounts in $ thousands and duration in years):

Assets Amount Duration

T-bills $180 0.50

Loans 4,548 7.00

Total Assets 4,728

Liabilities

Deposits 4,184 1.00

Total Liabilities 4,184

Equity 544

Total Lia & NW 4,728

a. What is the average duration of all the assets?

b. The average duration of all the liabilities is:

[4,184*1]/4184 = 1.00 years

c. What is the leverage-adjusted duration gap? Where, k = market value of liabilities/market value of assets

DG = DA - kDL =

Remember that a positive leverage-adjusted duration gap actually indicates that an increase in interest rates will lead to a decrease in net worth.

d. What is the forecasted impact on the market value of equity caused by a relative upward shift in the entire yield curve of 1.5 percent [i.e., DR/(1+R) = 0.0150]?

The market value of the equity will change by the following:

MVE = -DG * (A) * R/(1 + R) = = $___________.