Consider the following extracts from the balance sheet of Radobank (values in millions and duration...
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Accounting
Consider the following extracts from the balance sheet of Radobank (values in millions and duration in years):
Value Duration
Loans (short term) 1700 0.9
Loans (long term) 3000 3.9
Mortgages 4400 8.4
T-bonds 1200 3.2
Deposits 8500 1.7
a Calculate the duration gap for Radobank
b What is the change in the market value of equity of Radobank, as a percentage of assets, if interest rates increase from 4.5% to 5.0%?
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