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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 cost of using a strategy of purchased liquidity management to meet the expected decline in deposits? Assume that the bank intends to keep $2 million in cash as liquidity precaution.
A. $10,000.
B. $15,000.
C. $30,000.
D. $40,000.
E. $50,000.
Answer
This answer is hidden. It contains 152 characters.
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