Explain duration GAP analysis in banks. Calculate the duration Gap of the following

excerpts from the balance sheet of a bank. Also calculate the impact on the equity of the

bank in the different interest rates scenarios.

Balance Sheet for

Hypothetical Bank

Assets. Duration

Current Assets 1000- 7 years

Fixed Assets 300 - 0

Total assets 1300

Liabilities. Duration

CurrentLiabilities 700 5 Years

Other Liab. 300 0

Equity. 300 0

Total 1300

Scenarios for Impact analysis:

1. Interest rates increased by 1%

2. Interest rates decreased by 1%