If FNBNA Is Expecting a $10 Million Net Deposit Drain

If FNBNA is expecting a $10 million net deposit drain and the securities liquidity index is 0.97, by how much will pre-tax net income change if the drain is funded entirely through securities sales?

A) -$306,122
B) -$150,000
C) -$375,339
D) -$476,289
E) -$474,490 Liquidate securities totaling 10M/0.97 = 10,309,278, losing interest income = 5.5% x 10,309,278 = 567,010, losing $309,278 on the fire sale, and gain in interest expense of 4% x 10 million core deposits = 400,000, for net total loss of $476,289.