The Average Interest Earned on the Loans Is 6 Percent

Multiple Choice

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 cost of using a strategy of reducing its asset base to meet the expected decline in deposits? Assume that the bank intends to keep $2 million in cash as a liquidity precaution.

A) $10,000.
B) $15,000.
C) $30,000.
D) $40,000.
E) $50,000.