Use the balance sheet of a bank below to answer the following.

Assets Liabilities

Required Reserves 8 m Money Market Deposits 50 m

Excess Reserves 7 m 3-year CDs 40 m

T-bills 65 m Capital 10 m

Mortgages 10 m

Commercial Loans 10 m

Current interest rate is 10%; the duration of asset is 1.8 years, the duration of liabilities 2 years.

1. What is the amount of RSA and RSL?

2. What is the income gap amount?

3. What is the duration gap?

4.What happens to this bank's income if the interest rises by 1%?

5. What happens when the interest rises by 1% to this bank's

a. Asset value

b. Liability value

c. net worth

6. What type of financial institution is it, does it resemble the First National Bank, or the Friendly Finance Company, and why?