Consider the following information of a bank's balance sheet: Reserves = $200 Reserve ratio = 0.25 Loans = $600 Debt = $340 Securities = $400 a) Write down the balance sheet and find the leverage ratio. b) If the bank's value of assets rises by 2%, what happens to the value of the owner's equity in the bank? c) How large would the decline in the value of stocks held in the bank need to be for the bank to go insolvent?

Consider the following information of a bank's balance sheet: Reserves = $200 Reserve ratio = 0.25 Loans = $600 Debt = $340 Securities = $400 a) Write down the balance sheet and find the leverage ratio. b) If the bank's value of assets rises by 2%, what happens to the value of the owner's equity in the bank? c) How large would the decline in the value of stocks held in the bank need to be for the bank to go insolvent?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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