Questions 4-9 refer to the following balance sheet of a hypothetical private bank called Bank A. You are asked to show what the balance sheet for Bank A would look like after Bank A sells all of its loans to Bank B. You should assume that Bank B thinks the loans are only worth 80, so that Bank A sells its loans at a loss of 20. You should assume that Bank B pays for the loans it buys from A by instructing the Fed to transfer 80 in deposits that Bank B had with the Fed into the deposits that Bank A has with the Fed. Bank A assets Bank A liabilities Loans 100 Deposits 100 Investments 150 Debt 150 Cash and reserves 50 Equity (net worth) 50
Questions 4-9 refer to the following balance sheet of a hypothetical private bank called Bank A. You are asked to show what the balance sheet for Bank A would look like after Bank A sells all of its loans to Bank B. You should assume that Bank B thinks the loans are only worth 80, so that Bank A sells its loans at a loss of 20. You should assume that Bank B pays for the loans it buys from A by instructing the Fed to transfer 80 in deposits that Bank B had with the Fed into the deposits that Bank A has with the Fed. Bank A assets Bank A liabilities Loans 100 Deposits 100 Investments 150 Debt 150 Cash and reserves 50 Equity (net worth) 50
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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what would the new value for Loans be for Bank A? and investment, Cash and reserve,deposits, debt and equity?
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