Using the following information, answer B,C,D, and E.

b.What is the average duration of all the assets and what is the average duration of all the liabilities? Average Duration of Assets: Average Duration of Liabilities: c. What is the leverage-adjusted duration gap? Is Angus State Bank exposed to interest rate risk? Is it exposed if interest rate increase or decrease? Leverage-adjusted duration gap (DG) = D A - kDL= d. What is the forecasted impact on the market value of equity caused by a relative 1.5 percent upward shift in the entire yield curve? [i.e., Ar/(1+r) = 0.0150]? The market value of the equity will change by the following: MVE = -DG * (A) * r!(] + r) = e. What variables are available to the nancial institution to immunize or at least reduce interest rate risk exposure on the balance sheet? Taking one variable at a time, how much would each variable need to change to get DGAP equal to 0? To immunize the institution for interest rate risk, the Leverage Adjusted 00 needs to be zero: Hint: DG = DA kDL = 0 (III 1. You are asked to determine the market value (mark-to-market) balance sheet for Blackburn State Bank and loan duration (amounts in $ thousands and duration in years): Book Value Market Value Assets. Amount Amount Donation T-bills $ 360 $ 360 0.50 Loans* 10,000 $2.52!! I Lil! Total Assets 10,360 2&1! Liabilities Deposits 8.3.6.8 8,368 0.50 Total Liabilities 8,368 8,368 Equity 1 ,992 _1,462_ Total Lia and NW 10,360 9,830 (10,000*6.5%) *(1-(1+7%) "~20)/7%+l0,000/ (1+7%) we 9,470.3o=9,47o 360+9,470=9,830 9,830-8,363= 1,462 *Since this is a simple bank, it has only one type of loan. The loan has a $10,000 book value (current outstanding principal), "amortized" loan with annual payments, an interest rate of 6.5 percent, and 20-years to maturity. Similar amortized loans today (market interest rate for similar loans) have an interest rate of 7 percent which, is the market yield