The following is a balance sheet of a commercial bank (in millions of dollars):

Assets Liabilities and Equity Cash $ 5 Insured deposits $30 Loans 40 Uninsured deposits 10 Equity 5 Total assets $45 Total liabilities and equity $45 The bank experiences a run on its deposits after it declares that it will write off

$10 million of its loans as a result of nonpayment. The bank has the option of meeting the withdrawals by first drawing down its cash and then selling off its loans. A fire sale of the remaining loans in one day can be accomplished at a 10 percent discount. They can be sold at a 5 percent discount if they are sold in two days. The full market value will be obtained if they are sold after two days.

a. What is the amount of loss to the insured depositors if a run on the bank occurs on the first day? On the second day?

b. What amount do the uninsured depositors lose if the FDIC uses the insured depositor transfer method to close the bank immediately? The assets will be sold in two days.