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Compute bank B's new equity after bank A's failure.

Compute bank B's new equity after bank A's failure.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question 34 Following the wipe out of its assets, bank A fails. As a result, bank B must write- off its credit to bank A. Below is the balance sheet of bank B before bank A's failure. Compute bank B's new equity after bank A's failure. Assets Liabilities Loan to bank A: 70 Deposits: 90 Loans to households: 10O Other debts: 30 Equity: 40 Question 35 and so bank B also fails. This is an example of systemic risk: the failure of one bank can precipitate the collapse of the whole system. O True O False
Transcribed Image Text:Question 34 Following the wipe out of its assets, bank A fails. As a result, bank B must write- off its credit to bank A. Below is the balance sheet of bank B before bank A's failure. Compute bank B's new equity after bank A's failure. Assets Liabilities Loan to bank A: 70 Deposits: 90 Loans to households: 10O Other debts: 30 Equity: 40 Question 35 and so bank B also fails. This is an example of systemic risk: the failure of one bank can precipitate the collapse of the whole system. O True O False
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