Duration Bank Has the Following Assets and Liabilities as of Year-End

Multiple Choice

Duration Bank has the following assets and liabilities as of year-end. All assets and liabilities are currently priced at par and pay interest annually. What is the effect on the value of the FI's equity if interest rates decrease by 1 percent?

A) Gain of $0.697 million.
B) Gain of $0.338 million.
C) Loss of $1.622 million.
D) No change in equity.
E) Loss of $0.605 million.