4.Bank Y and Bank Z both have assets of $1 billion. Therefore, the return on assets for both banks is the same. However, Bank Y has liabilities of $800 million while Bank Z's liabilities are $900 million.In which bank would you prefer to hold an equity stake?Explain your choice.

5.Looking again at Bank A and Bank B in Problem 5, based on the information available, which bank do you think is at the greatest risk of insolvency?What other information might you use to assess the risk of default of these banks?

6.Why do you think that U.S. banks are prohibited from holding equity as part of their portfolios?