Assume the following:

i. The public holds no currency.

ii. The ratio of reserves to deposits is 0.1.

iii. The aggregate demand for money is given by

M^d = $Y(0.6-8.75i)

Initially, the monetary base (or the central bank money)is $125 billion, and nominal income ($Y) is $5 trillion.

a. Determine the demand equation for central bank money.

b. Calculate the equilibrium interest rate by setting the demand for central bank money equal to the supply of central bank money.