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On the asset side, a bank has the following entries in the year 2 0 2 3 : Mortages: $ 1 2 0 0 Mortgage
On the asset side, a bank has the following entries in the year :
Mortages: $
Mortgagebacked securities: $
Cash: $
On the liability side, it has:
Deposits: $
Shortterm debt: $
longterm debt: $
In some creditors that provide shortterm funding do not want to lend to the bank anymore, so they demand that the bank pay back $ out of the $ in shortterm debt. The bank liquidates its cash to pay back its debt, but that is not enough. Therefore, it needs to liquidate some of its mortgagebacked securities These mortgagebacked securities are very illiquid, and the bank can liquidate them at only of their value.
What is the new net worth of the bank after liquidating the amount of mortgagebacked securities needed to exactly pay back the creditors who demand their money back?
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