3 1. Consider the following balance sheet for a commercial bank: Liabilities Cash assets Securities Assets $250 750 $4500 300 Deposits Subordinated debentures Equity capital Loans 4000 200 Required: (i) Suppose that regulators require that the ratio of equity capital to loans must at least be equal to 6 percent and that the ratio of equity capital to total assets must at least be equal to 4 percent. Is the bank presently meeting both of these standards? (ii) Suppose that the bank makes an argument to its regulators that equity capital is not the only cushion it has available protect depositors from loss in the event the bank fails. Irrespective of whether or not the regulators agree, do you believe that the bank has a legitimate argument? Explain why or why not