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

ZED Bank Plc 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 2019:
Assets Amount (000) Rate (%) Duration
Cash 33,00000
Bonds 122,0007.21.8 Years
Commercial loans 385,00011.01.5 Years
Total 540,000
Liabilities & Equity
Small time deposits 140,0003.64.0 Years
Large CDs 80,0006.31.0 Years
Transactions account 260,0002.83.3 Years
Equity 60,000
Total 540,000
Required:
A. Use the information in the table to calculate the banks duration gap. Is this bank positioned to gain or lose if interest rates rise?
B. Estimate the change in market value of equity if all market interest rates fall by an average of 1.5 percent.
C. Provide a specific transaction that the bank could implement to immunize its interest rate risk. The transaction may be a new asset funded by a new liability or an asset sale and the simultaneous purchase of another asset.

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