The following problem has two parts (A and B). Answer in the space below, but do all the work in Excel and submit it along with the rest of computational problems.

Part A. Bank of America reports $11 billion in Sensitive-Rate Assets, $50 billion in Rate-Sensitive Liabilities and a total of $60 billion in Total Assets with a Asset Duration of 6 and Liability Duration of 7. In addition, they show interest revenue of 1.8 billion and Interest Expense of 1.2 billion. A regression model on firm's stock volatility based on interest rates has been provided by your analytical team: Stock Return= 2+ (.38 )-(1.2)+.2 .

Asses their interest rate risk using all the tools at your disposal.

Part B. In the problem above and according to the metrics obtained, if the bank thinks interest rates are going to decline should it hedge its position? Why? If so, name 3 ways to hedge interest rate risk?