1. Assume that the following banks have the same net amount of 4 million, but they are different due to their capital structure:

BANK A

Reserves 420

Loans 3580

Total assets 4000

BANK B

Reserves 420

Loans 3580

Total assets 4000

Deposits 3320 Bank Capital 680 Total Liabilities and Equity 4000

Deposits 3320 Bank Capital 680 Total Liabilities and Equity 4000

a) Which Bank is more attractive for shareholders? b) Whichbankisriskierincaseofloandepreciationat20million?

Showyourcalculationstosupportyoursuggestions.