Exercise 2: Money - Banking

You just won the lottery and are considering depositing your newly-earned money into a bank. You have two options: Banka and Banko. To make your decision, you ask for the balance sheets, which read:

Bank a's Balance Sheet

Assets			Liabilities
Reserves	$10,000		Deposits	$100,000
Loans	$100,000		Debt	$20,000
Securities	$40,000		Equity	$30,000

Bank b's Balance Sheet

Assets			Liabilities
Reserves	$10,000		Deposits	$100,000
Loans	$100,000		Debt	$40,000
Securities	$40,000		Equity	$10,000

a. You have to look at the leverage ratio to decide. You calculate that the leverage ratio of Bank a is _____ and that of Bank b is _____ .

b. You decide to go for the one that is less vulnerable in the event of a shock or recession. Therefore, you deposit your money in ______ .