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Fortune Bank Assets Duration Liabilities Duration Reserves $8,000,000 0.00 Checkable Deposits $8,000,000 1.60 Securities Money Market Deposits $12,000,000 1.20 2 years $12,000,000 7.50 Variables-rate $15,000,000 0.80 Residential Mortgages 2 years $20,000,000 5.20 1 to 2 Years $10,000,000 2.00 Buildings, etc. $30,000,000 0.00 $10,000,000 4.80 Bank Capital $10,000,000 Total $150,000,000 Total $150,000,000 2 years b.1 Based on the financial information for the current year, calculate the duration gap for Fortune Bank Show all the calculations. 10 marks il. Refer to the duration gap that you calculate in part (b)(I), what will happen to the bank's market value of net worth (as a percentage of assets) if interest rates Increase from 8% to 16%? Will Fortune Bank stay in business? Why or why not? Explain your answers and show all the calculations. 5 marks Fortune Bank Assets Duration Liabilities Duration Reserves $8,000,000 0.00 Checkable Deposits $8,000,000 1.60 Securities Money Market Deposits $12,000,000 1.20 2 years $12,000,000 7.50 Variables-rate $15,000,000 0.80 Residential Mortgages 2 years $20,000,000 5.20 1 to 2 Years $10,000,000 2.00 Buildings, etc. $30,000,000 0.00 $10,000,000 4.80 Bank Capital $10,000,000 Total $150,000,000 Total $150,000,000 2 years b.1 Based on the financial information for the current year, calculate the duration gap for Fortune Bank Show all the calculations. 10 marks il. Refer to the duration gap that you calculate in part (b)(I), what will happen to the bank's market value of net worth (as a percentage of assets) if interest rates Increase from 8% to 16%? Will Fortune Bank stay in business? Why or why not? Explain your answers and show all the calculations. 5 marks

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