Answered: The World's Best Bank (WBB) is the only… | bartleby

International Financial Management

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter4: Exchange Rate Determination

Section: Chapter Questions

Problem 20QA

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General accounting

The World's Best Bank (WBB) is the only bank in the country and its T-account
is given in the table. Suppose that due to the mortgage crisis, some people
default on their loans, and their value thus decreases by 50. What happens to
the leverage ratio (assuming the bank makes no changes in reserves)?
Assets
Liabilities
(in $
(in $
million)
million)
300
Deposits
600
Reserves
Loans
200
Cash held in overseas
100
Debt
banks
Securities
200
300
Capital (owner's
equity)
100

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