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Question
The average interest earned on the loans is 6 percent and the average cost of deposits is 5 percent. Rising interest rates are expected to reduce the deposits by $3 million. Borrowing more debt will cost the bank 5.5 percent in the short term.
What will be the size of the bank if a stored liquidity management strategy is adopted?
A. $9 million.
B. $11 million.
C. $12 million.
D. $14 million.
E. $15 million.
Answer
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