The following is the balance sheet of a VRY-SMPL Bank. All the items are recorded based on the book value and they were purchased at par value.

Asset ($mil)		Liability ($mil)
2-year annual 6.45%pa coupon bond	$200	12-year treasury bonds coupon 5.50%p.a.	$200
6-year 3.5%pa semi-annual coupon bond	$150	10-year semi-annual coupon 6.30%pa bond	$300
15-year treasury bond 7.5 % annual coupon bond	$350	Equity	$200
	$700		$700

4. Assume current market yield is flat at 3.0% p.a. What is the duration gap of the bank?

(3 marks)

5. Using the duration gap estimated from question 6, what will happen to the net worth of the

bank if the market yield goes up by 2.5%p.a.?...................................................... (2 marks)

6. What is the maturity gap of the bank (1 marks)