Question
As a result of loan write-offs, Bank A has to be liquidated by the regulators. The book value of the assets and liabilities of the
As a result of loan write-offs, Bank A has to be liquidated by the regulators. The book value of the assets and liabilities of the bank is presented below (in millions of dollars). The market value of the loans has been estimated at $240 million. Loans (Book value) $340 Insured Deposits $200 Uninsured Deposits $100 Equity (net worth) $40 (a) What is the current net worth (market value) of the bank? (b) If the insured depositor transfer resolution method is used by the regulators to resolve the bank failure what is the cost to the insured depositors, uninsured depositors, and the FDIC, respectively? (c) re-answer part (b) assuming that the payout method is used by regulators.
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