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ike Bank starts with $3000 in bank capital. It then accepts $2000 in deposits. It keeps 25 percent of deposits in reserve. It uses the
ike Bank starts with $3000 in bank capital. It then accepts $2000 in deposits. It keeps 25 percent of deposits in reserve. It uses the rest of its assets to make bank loans.
a. Show the balance sheet of Like Bank. b. What is Like Banks leverage ratio? c. Suppose that 15 percent of the borrowers from like Bank default and these bank loans become worthless. Show the banks new balance sheet.
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