Rising interest rates due to Fed policy will pose a $$175M$ drain on retail deposits next year

a$.$ The bank's average funding cost of retail deposits is $4\%$ and note rates on loans is $5\mathrm{.}5\%.$

The bank wants to lower its loan portfolio to offset the drop in deposits. What impact

would this have on net interest income and the balance sheet after this decision is made?

Change in NII

Change in size of the bank

b$.$ Assume rates on new debt issuances are $4\mathrm{.}5\%$

What is the impact on net interest income of offseting the deposit drain

with an increase in new debt?

Change in NII

c$.$ What is the size of the bank after this strategy is employed?