Waukesha Bank
Balance Sheet at December 31, 2021
			Amount	Duration
			($ millions)	(years)
Assets
Cash and Cash items			$6.00	0.00
Reserves at Fed			5.00	0.00
Securities:
Less than 1 year			41.00	0.40
1 - 2 years			3.00	1.60
Greater than 2 years			8.00	4.16
Residential mortgages:
Variable-rate			30.00	0.40
Fixed-rate (30 years)			15.00	10.30
Commercial loans:
Less than 1 year			50.00	0.90
1 - 2 years			33.00	1.80
Greater than 2 years			23.00	15.00
Building and Equipment			12.00	0.00
Other Assets			1.00	0.00
Total Assets			$227.00
			Amount	Duration
			($ millions)	(years)
Liabilities
Checkable deposits			$9.00	1.00
Money market demand accounts			8.00	0.80
Savings deposits			20.00	1.00
Certificates of deposit:
Variable-rate			50.00	0.90
Less than 1 year			21.00	0.30
1 - 2 years			13.00	1.80
Greater than 2 years			4.00	8.00
Fed funds borrowed			15.00	0.01
Borrowings:
Less than 1 year			40.00	0.40
1 - 2 years			9.00	1.20
Greater than 2 years			32.00	12.00
Other liabilities			1.00	0.00
Total Liabilities			$222.00
Equity Capital			$5.00
Total Liabilities and Equity			$227.00

Scenario 2: Suppose you decide to immunize the bank by issuing long-term debt of $30 million with a duration of X years and using those funds to make variable-rate residential mortgage loans with a duration of 0.50 years.

1. What is the duration of the long-term debt that you must issue to bring DGAPK = 0? (0.2 pt.)
2. Show the new balance sheet. (0.2 pt.)
3. Now, what is your ISGAP? (0.2 pt.)
4. Explain the pros and cons of this banks action. (0.2 pt.)