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Bank A and B have identical return on assets but different leverage. Bank As leverage is 10; Bank Bs leverage is 20. What percentage of
Bank A and B have identical return on assets but different leverage. Bank As leverage is 10; Bank Bs leverage is 20. What percentage of As assets have to be written off to declare Bank A bankrupt, and what percentage of Bs assets have to be written off to declare Bank B bankrupt? Which bank is riskier and why? [10 marks]
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