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Consider the following balance sheets of two banks. These two banks have equal amounts of assets but are leveraged differently. Assume that there is no regulatory capital requirement. Balance Sheet of Pry Bank Assets Liabilities Outstanding Loans: $300,000 Deposits (Liabilities): $270,000 Total: $300,000 Capital (Net worth): Total: $30,000 $300,000 Balance Sheet of Crow Bank Assets Liabilities Outstanding Loans: $300,000 Deposits (Liabilities): $285,000 Capital (Net worth): $15,000 Total: $300,000 Total: $300,000

Consider the following balance sheets of two banks. These two banks have equal amounts of assets but are leveraged differently. Assume that there is no regulatory capital requirement. Balance Sheet of Pry Bank Assets Liabilities Outstanding Loans: $300,000 Deposits (Liabilities): $270,000 Total: $300,000 Capital (Net worth): Total: $30,000 $300,000 Balance Sheet of Crow Bank Assets Liabilities Outstanding Loans: $300,000 Deposits (Liabilities): $285,000 Capital (Net worth): $15,000 Total: $300,000 Total: $300,000

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Consider the following balance sheets of two banks. These two banks have equal amounts of assets but are leveraged differently. Assume that there is no regulatory capital requirement. Balance Sheet of Pry Bank Assets Liabilities Outstanding Loans: $300,000 Deposits (Liabilities): $270,000 Total: $300,000 Capital (Net worth): Total: $30,000 $300,000 Balance Sheet of Crow Bank Assets Liabilities Outstanding Loans: $300,000 Deposits (Liabilities): $285,000 Capital (Net worth): $15,000 Total: $300,000 Total: $300,000
Transcribed Image Text:Consider the following balance sheets of two banks. These two banks have equal amounts of assets but are leveraged differently. Assume that there is no regulatory capital requirement. Balance Sheet of Pry Bank Assets Liabilities Outstanding Loans: $300,000 Deposits (Liabilities): $270,000 Total: $300,000 Capital (Net worth): Total: $30,000 $300,000 Balance Sheet of Crow Bank Assets Liabilities Outstanding Loans: $300,000 Deposits (Liabilities): $285,000 Capital (Net worth): $15,000 Total: $300,000 Total: $300,000
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