Question
The average cost of deposits is 5 percent and the average yield on loans is 8 percent. The DI decides to reduce its loan portfolio
The average cost of deposits is 5 percent and the average yield on loans is 8 percent. The DI decides to reduce its loan portfolio to offset this expected decline in deposits. What is the cost to the firm from this strategy after the drain? (Enter your answer in dollars not in millions.) a-2. What will be the total asset size of the firm after the drain? (Enter your answer in millions.) b-1. If the cost of issuing new short-term debt is 6.5 percent, what is the cost of offsetting the expected drain if the DI increases its liabilities? (Enter your answer in dollars not in millions.) b-2. What will be the total asset size of the DI from this strategy after the drain? (Enter your answer in millions.)
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