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Consider the following extracts from the balance sheet of Radobank (values in millions and duration...

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Accounting

Consider the following extracts from the balance sheet of Radobank (values in millions and duration in years):

Value Duration

Loans (short term) 1700 0.9

Loans (long term) 3000 3.9

Mortgages 4400 8.4

T-bonds 1200 3.2

Deposits 8500 1.7

a Calculate the duration gap for Radobank

b What is the change in the market value of equity of Radobank, as a percentage of assets, if interest rates increase from 4.5% to 5.0%?

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