(a) What special assumptions do income and duration gap analysis make about interest rate changes

The following financial statement is for the current year. From the past, you know that 10% of fixed- rate mortgages prepay each year. You also estimate that 10% of checkable deposits and 20% of savings accounts are rate sensitive. C 15,000,000 C 5,500,000 8,000,000 C 15,000,000 22,000,000 Second National Bank Assets Liabilities Reserves 1,500,000 Checkable Deposits Securities Money Market Deposits 2 years C 12,000,000 Variables-rate Residential 2 years Commercial Loans Fed Funds 2 years C 30,000,000 1 to 2 Years Buildings, etc. C 2,500,000 > 2 years Bank Capital C 5,000,000 2,500,000 5,000,000 12,000,000 C 3,000,000 C 2,000,000 C 5,000,000 Total C100,000,000 Total C100,000,000