Assuming that a financial institution has $10 million in assets, including $1 million in cash and $9 million in loans, has $6 million in core deposits, and also holds $2 million in affiliated liabilities and $2 million in equity, it is expected that a rise in interest rates will result in a net loss of S2 million in core deposits during the year.

（1）. With the average cost of deposits at 6% and the average cost of loans at 8%, the financial institution decides to shrink its loan portfolio to compensate for this expected reduction in deposits. Based on the strategy, what will be the cost to the financial institution after the loss of deposits? How big?

（2）. If the cost of issuing new short-term debt is 7.5 per cent, what will be the cost to the institution to cover expected deposit outflows by increasing its liabilities? Using this strategy, what is the size of the financial institution after the loss of deposits?