The following information is about the spot rates on April 29, 2021 for Second Duration Savings' assets (loans) and liabilities (CDs). All interest rates are fixed and paid annually.

Assets

Liabilities

1-year loan rate 4.50 percent

1-year CD rate: 2.50 percent

2-year loan rate: 6.50 percent

2-year CD rate: 3.00 percent

1. (5 Marks) What is the duration of the two-year loan (per $100 face value) if it is selling at par?
2. (5 Marks) If the FI finances a $5 million 2-year loan with a $4 million 1-year CD and equity, what is the leveraged adjusted duration gap of this position? (Use your answer to the previous question.)
3. (5 Marks) Would Second Duration Savings suffer loss on the position in part b) when interest rate goes up or goes down over the next 2 years? For 1% change in interest rate, how much would Second Duration Savings lose on this position?