Suppose a bank has the following entries on its balance sheet: $20 million in property and buildings;

Question:

Suppose a bank has the following entries on its balance sheet: $20 million in property and buildings; $200 million in government bonds; $300 million in loans; $5 million cash in vault; $95 million in accounts with the Federal Reserve; $550 million in checking account liabilities. There are no other entries on the balance sheet except for shareholders’ equity.
a. What is this bank’s “capital?”
b. What is the maximum value of the bank’s loans that could be “written off” due to bankruptcies before the bank would become insolvent?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...

Fantastic news! We've Found the answer you've been seeking!