This question is related to financial institutions management.

Interest Rate Risk (Maturity Model) ABC Bank has the following market value balance sheet (in millions, all interest at annual rates). All securities are selling at par equal to book value. (2 marks) $ 100 200 150 Assets $ Liabilities and equity Cash 30 Demand deposits 15-year commercial loan at 5-year CDs at 4% interest, 8% interest, balloon 170 balloon payment payment 30-year mortgages at 6% 20-year debentures at 5% 300 interest, balloon payment interest, balloon payment Equity Total assets 500 Total liabilities and equity a) What is the maturity gap for ABC Bank? b) What will be the maturity gap if the interest rates on all assets and liabilities increase by 1 per cent? c) What will happen to the market value of the equity? 50 500