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%?

Answer rating: 100% (QA)

a The duration gap is a measure of the sensitivity of a banks assets and liabilities to interest rat... View the full answer