The Average Interest Earned on the Loans Is 6 Percent

question 77

Multiple Choice

$\begin{array}{l}\begin{array}{l}\text { Assets} & \text { Liabilities and Equity}\\\text { Cash Required Reserves}&\$ 2 \text { million Deposits } \\\text { Loans}&\$ 10 \text { million Longterm Debt } \\&\text { Equity } \\\text { Total}&\$ 12 \text { million Total }\end{array}\begin{array}{l}\\\$ 8 \text { million } \\\$ 2 \text { million } \\\$ 2 \text { million } \\\$ 12 \text { million }\end{array}\end{array}$ 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 $3 million.Borrowing more debt will cost the bank 5.5 percent in the short term.
What will be the size of the bank if a stored liquidity management strategy is adopted?

• A)$9 million.
• B)$11 million.
• C)$12 million.
• D)$14 million.

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Definitions:

Airway Obstruction

A blockage in the air passages that can impede normal breathing.

Fluid Intake

The total volume of fluids consumed by an individual from food, drink, and metabolic processes.

Humidity

The concentration of water vapor present in the air, important in various healthcare settings to maintain patient comfort and device functionality.

Gastrostomy Feeding Tube

A tube inserted through the abdomen into the stomach to deliver nutrition directly to someone who cannot eat by mouth.