B&K grocery store sells two types of soft drinks: the brand name A1 Cola and the cheaper store brand B&K cola. The margin of profit on the A1 Cola is about 5 cents per can, whereas the B&K Cola grosses 7 cents per can. On the average, the store sells no more than 500 cans of both colas a day. Although A1 is a better recognized name, customers tend to buy more of the B&K brand because it is considerably cheaper. It is estimated that the B&K brand outsells the A1 brand by a ratio of at least 2:1. However, B&K sells at least 100 cans of A1 a day. How many cans of each brand should the store carry daily to maximize the profit?

Variable rate cd’s = $90 treasury bills = $150 discount loans = $20 treasury notes = $100 fixed rate cds = $160 money market deposit accts. = $140 savings deposits = $90 fed funds borrowing = $40 variable rate mortgage loans $140 demand deposits = $40 primary reserves = $50 fixed rate loans = $210 fed funds lending = $50 equity capital = $120 a. develop a balance sheet from the above data. be sure to divide your balance sheet into rate-sensitive assets and liabilities as we did in class and in the examples. b. perform a standard gap analysis and a duration analysis using the above data if you have a 1.15% decrease in interest rates and an average duration of assets of 5.4 years and an average duration of liabilities of 3.8 years. c. indicate if this bank will remain solvent after the valuation changes. if so, indicate the new level of equity capital after the valuation changes. if not, indicate the amount of the shortage in equity capital.