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Question: (a) What are the benefits and costs for a bank when it decides to increase the amount of its bank capital? Explain your answer.

(b) If a bank is falling short of meeting its capital requirements by $1 million, what three things can it do to rectify the situation? Explain your answer.

(c) If you are a banker and expect interest rates to rise in the future, would you want to make short-term or long-term loans? Explain your answer.

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