Calculate the impact of a decrease in interest rates from 3% to 2% on the equity of Robobank. (7 marks)

b) Consider the following balance sheet of Robobank: () () Duration Liabilities Money market deposits 1000 0.7 Assets Duration Variable-rate mortgages 1300 8.1 Fixed-rate mortgages 1200 6.1 Commercial loans 3000 4.2 3000 2.3 Savings deposits Variable-rate CD 1. (> 1 year) Equity Total Physical capital Total 500 6000 1000 1.2 1000 6000 Make the following assumptions on the runoff of cash flows: fixed-rate mortgages repaid during the year: 10 percent; proportion of savings deposits and variable- rate CD that are rate-sensitive: 20 per cent. b) Consider the following balance sheet of Robobank: () () Duration Liabilities Money market deposits 1000 0.7 Assets Duration Variable-rate mortgages 1300 8.1 Fixed-rate mortgages 1200 6.1 Commercial loans 3000 4.2 3000 2.3 Savings deposits Variable-rate CD 1. (> 1 year) Equity Total Physical capital Total 500 6000 1000 1.2 1000 6000 Make the following assumptions on the runoff of cash flows: fixed-rate mortgages repaid during the year: 10 percent; proportion of savings deposits and variable- rate CD that are rate-sensitive: 20 per cent