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Happy Bank has $200 in bank capital. Customers deposit $800 in bank demand deposits. HappyBank keeps 12.5% in reserves and uses the rest to make

Happy Bank has $200 in bank capital. Customers deposit $800 in bank demand deposits. HappyBank keeps 12.5% in reserves and uses the rest to make bank loans.

a. What is the amount of assets in the Happy Bank Taccount?

b. What is Happy Banks leverage ratio?

c. Suppose that $90 of Happy Banks loans default and become worthless. How much do thebanks assets decline? How much do the banks liabilities decline? How much does the banksdeposits decline? How much does the banks capital decline?

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