Liabilities & Equity		Assets
11,000,000	Deposits	5,000,000	Cash Required Reserves
2,000,000	Long-term Debt	10,000,000	Loans
2,000,000	Equity
15,000,000	Total	15,000,000	Total

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 $4 million. Borrowing more debt will cost the bank 5.5 percent in the short term.

A) What will be the size of the bank if a stored liquidity management strategy is adopted?

B) What will be the cost of using a strategy of reducing its asset base to meet the expected decline in deposits? Assume that the bank intends to keep $5 million in cash as a liquidity precaution.

C) 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 $5 million in cash as liquidity precaution.

D) What will be the size of the bank if a purchased liquidity management strategy is adopted?