The change in equity value per 1% change in yield can be calculated using the formula:
E=(Dl×MDlDd×MDd)×y\Delta E = (D_l \times \text{MD}_l - D_d \times \text{MD}_d) \times \Delta yE=(Dl×MDlDd×MDd)×y Where DlD_lDl and DdD_dDd are the dollar amounts of loans and deposits, respectively, and MDl\text{MD}_lMDl and MDd\text{MD}_dMDd are their modified durations. For Gamma Bank:
E=(300×2200×1)×0.01=600200=400×0.01=2 million\Delta E = (300 \times 2 - 200 \times 1) \times 0.01 = 600
- 200 = 400 \times 0.01 = -2 \text{ million}E=(300×2200×1)×0.01=600200=400×0.01=2 milli