1. A bank has the below balance sheet information. In addition, 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 purchased liquidity management strategy is adopted?

   

   	A.	$15 million.
   	B.	$11 million.
   	C.	$9 million.
   	D.	$14 million.
   	E.	$12 million.

\begin{tabular}{|l|r|l|r|} \hline \multicolumn{2}{|c|}{ Assets } & \multicolumn{2}{c|}{ Liabilities and Equity } \\ \hline Cash Required Reserves & $2 million & Deposits & $8 million \\ \hline Loans & $10 million & Long-term Debt & $2 million \\ \hline & & Equity & $2 million \\ \hline Total & $12 million & Total & $12 million \\ \hline \end{tabular}