$($a$)$ Distinguish between re$-$financing risk and re$-$investment risk. Give examples of each. $(8$ marks$)$

$($b$)$ Consider the following extracts from the balance sheet of Bancomutual $($values in fmillions and duration in

years$)$:

Calculate the duration gap for Bancomutual. $(5$ marks$)$

$($c$)$ Explain the relationship between the market value of equity and a change in interest rates. $(4$ marks$)$

$($d$)$ What is the change in the market value of equity of Bancomutual, as a percentage of assets, if interest rates

decrease from $5\mathrm{.}5\%$ to $4\mathrm{.}5\%?(3$ marks$)$

$($e$)$ Critically discuss the main problems associated with duration gap analysis. $(5$ marks$)$