Calculating and using duration gap

State Bank's balance sheet is listed below. Market yields and durations (in years) are in parenthesis, and amounts are in millions.

AssetsLiabilities and equityCash$20Demand deposits$250Interbank lending (5.05%, 0.02)150Savings accounts (4.5%, 0.50)360T-notes (5.25%, 0.22)300CDs (4.3%, 0.48)715T-bonds (7.50%, 7.55)200CDs (6%, 4.45)1105Consumer loans (6%, 2.50)900Interbank borrowings (5%, 0.02)515Business loans (5.8%, 6.58)475Commercial paper (5.05%, 0.45)400Fixed-rate mortgages (7.85%, 19.50)1200Subordinated debt:Fixed-rate (7.25%, 6.65)200Variable-rate mortgages, repriced @ quarter (6.3%, 0.25)580Premises and equipment120Total liabilities$3545Equity400Total assets$3945Total liabilities and equity$3945

a

What is State Bank's duration gap?

b

Use these duration values to calculate the expected change in the value of the assets and liabilities of State Bank for the predicted increase of 1.5 per cent in interest rates.

c

What is the change in equity value forecasted from the duration values for the predicted increase in interest rates of 1.5 per cent?