ZED Bank Limited targets the market value of shareholders$$ equity to manage its interest rate risk. The table below provides information on its assets and liabilities for

the period ended $31$ December $2020$:

Assets Amount $($K$000)$ Rate $(\%)$ Duration

Cash $35,00000$

Bonds $125,0007\mathrm{.}5\%1\mathrm{.}8$ years

Commercial Loans $400,00012\mathrm{.}0\%1\mathrm{.}5$ years

Total $560,000$

Liabilities and Equity

Small time deposits $145,0003\mathrm{.}8\%4$ years

Large CDs $85,0006\mathrm{.}5\%1$ year

Transactions accounts $265,0003\mathrm{.}0\%3\mathrm{.}3$ year

Equity $65,000$

Total $560,000$

Required:

A$.$ Use the information in the table to calculate the bank$$s duration gap. $[12$ Marks$]$

B$.$ Is this bank positioned to gain or lose if interest rates rise and why? $[2$ Marks$]$

C$.$ Provide a specific transaction that the bank could implement to immunise its

interest rate risk. $[6$ Marks$]$