Suppose a bank has the following assets and liabilities

$40 million in variable rate loans

$20 million in variable rate CD'S

$10 million in short term securities

$5 million in money market deposits

$10 million in reserves

$5 million in federal funds

$30 million in long term loans

$40 million in checable and savings deposits

$10 million in ling term securities

$30 million in long term CD's

a, Prepare the balance sheet fot this bank

b. Based upon the composition of the balance sheet for the bank , what is the bank assumong regarding interest rates? why?

c. Suppose the interest rates drop by 3%, determine the change in profits for the bank and explain why this change occurs.

d. Given the situation in part (c) above, what would you reccomend that the bank do in order to improve itsprofit picture?

Should the bank make any changes in the composition of its balance sheet?

If so, what assets and or liabilities should be adjusted and in what direction should the adjustments be made?