Question: ! This question will be sent to your instructor for grading. A bank with a two - year horizon has issued a one - year

! This question will be sent to your instructor for grading.
A bank with a two-year horizon has issued a one-year certificate of deposit for \(\$ 80\) million at an interest rate of 2 percent. With the proceeds, the bank has purchased a two-year Treasury note that pays 4 percent interest. What risk does the bank face in entering into these transactions? If Short-Term rates Rise to 3\%, what is the effect on the Bank's Income Statement and Blalance Sheet? As President of the bank, how could you avoid this issue?
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