Assets		Liabilities and Equity
Cash Required Reserves	$2 million	Deposits	$8 million
Loans	$10 million	Long-term Debt	$2 million
		Equity	$2 million
Total	$12 million	Total	$12 million

a. 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? Show work and discuss.