Look again at Problem. If RNB's assets have an average duration of five years and its liabilities have an average duration of three years, what is RNB's duration gap?
Problem
The following entries (in millions of dollars) are from the balance sheet of Rivendell National Bank (RNB):
U.S. Treasury Bills $20
Demand deposits 40
Mortgage-backed securities 30
Loand from other banks 5
C & J Loans 50
Discount Loans 5
NOW accounts 40
Savings Accounts 10
Reserve deposits with Federal Reserve 8
Cash items in the process of collection 5
Municipal bonds 5
Bank building 4
a. Use the entries to construct a balance sheet similar to the one in Table 10.1 on page 281, with assets on the left side of the balance sheet and liabilities and bank capital on the right side.
b. RNB's capital is what percentage of its assets?