Happy Bank starts with $200 in bank capital. It then takes in $1,000 in deposits. It keeps 20 percent of deposits in reserve. It uses the rest of its assets to make bank loans.

Complete the following balance sheet for Happy Bank.

Happy Bank
Assets	Liabilities
Reserves		Deposits
Loans		Bank Capital

Happy Bank's leverage ratio is

.

Suppose that some of the borrowers from Happy Bank default, making 12 percent of its bank loans worthless.

Complete Happy Bank's new balance sheet.

Happy Bank
Assets	Liabilities
Reserves		Deposits
Loans		Bank Capital

The bank's total assets decline by

, and the bank's capital declines by

.