f. The average interest earned on the loans is 7 percent and the average cost of deposits is 6 percent. Rising interest

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F The Average Interest Earned On The Loans Is 7 Percent And The Average Cost Of Deposits Is 6 Percent Rising Interest 1 (144.73 KiB) Viewed 17 times

f. The average interest earned on the loans is 7 percent and the average cost of deposits is 6 percent. Rising interest rates are expected to reduce the deposits by $1.5 million. Borrowing (Incurring) more debt will cost the bank 8 percent in the short term. Assets Cash Required Reserves Loans Liabilities and Equity $2 million Deposits $8 million $10 million Long-term Debt $2 million Equity $2 million $12 million Total $12 million Total 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 $2 million in cash as liquidity precaution.