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(a) From following statement identify all the rate sensitive assets and liabilities of the bank. If interest rate increases by 0.05%, what would be the bank's income gap between rate sensitive assets and liabilities? (Marks 3) (b) Using the same statement below. Calculate the duration gap and determine the impact on net worth of the bank, assuming interest rate increases from 10% to 11.5%? (Marks 4) Amount Duration Weighted ($ millions) (years) Duration (years Assets Cash and deposits 3 0.0 Securities Less than 1 year 0.5 1 to 2 years 1.7 Greater than 2 years 9.0 Consumer loans Less than 1 year 50 1 to 2 years 20 Greater than 2 years 15 3.0 Physical capital 0.0 Average duration Liabilities Commercial paper 40 0.2 Bank loans Less than 1 year 0.3 1 to 2 years 1.6 Greater than 2 years 3.5 Long-term bonds and other 5.5 long-term debt Average duration Q4 (a) If the First Bank gives a $100 loan to a borrower who deposited the loan in Bank A. Assume the RRR=10% and a $100 increase in reserves). Create a table of effects on 3 factors; deposits, loans and reserves starting from bank A followed by 15 to 20 more banks? (Marks 03) (b) Assume Central Bank conducts open market operations purchase of $100 worth bonds from both bank and non-bank (public). Show T-Accounts and interpretation for each separately to show impact on monetary base and money supply? (Marks 01) (c) Assume Central Bank conducts open market operations sale of $100 worth bonds from non-bank (public). Show T-Accounts and interpretation to show impact on monetary base and money supply?? (Marks 01)