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Bank A and B have identical return on assets but different leverage. Bank A's leverage is 10; Bank B's leverage is 20. What percentage of

Bank A and B have identical return on assets but different leverage. Bank A's

leverage is 10; Bank B's leverage is 20. What percentage of A's assets have to be

written off to declare Bank A bankrupt, and what percentage of B's assets have to

be written off to declare Bank B bankrupt? Which bank is riskier and why? [10 marks]

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