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3. Consider two banks (Bank 1 and Bank 2) with similar balance sheets. Bank 1 Bank 2 Assets Liabilities Assets Liabilities Reserves $75m Loans $525m
3. Consider two banks (Bank 1 and Bank 2) with similar balance sheets. Bank 1 Bank 2 Assets Liabilities Assets Liabilities Reserves $75m Loans $525m Deposits $500m Bank Capital $100m Reserves $100m Loans $500m Deposits $500m Bank Capital $100m If Bank 1 suffers a net deposit outflow of $50m with a 10-percent legal required reserve ratio on deposits, what actions must the bank take to keep the bank from failing? If Bank 2 suffers a deposit outflow of $50m, would it have to take the same actions? Assuming a hypothetical 10- percent capital requirement, how would these deposit outflows affect each bank's capital position? Carefully explain your answers
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