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please give a detailed answer (with all calculations) 2. LEVERAGE AND PROFITS Consider a bank with an initial asset size of $100, composed of $20
please give a detailed answer (with all calculations)
2. LEVERAGE AND PROFITS Consider a bank with an initial asset size of $100, composed of $20 cash and $80 loans granted to fund an indivisible risky loan. The loan return is 120 with probability 0.5, and 60 with probability 0.5. i. ii. Compute the expected return on the loan. Compute the expected return on assets of the bank. Compute the expected return on equity of the bank if E=10 and D=90. Compute the expected return on equity of the bank if E-40 and D=60. iii. iv. V. Compute the probability of bankrupt if E=10 and D=90. Compute the probability of bankrupt if E=40 and D=60. vi Step by Step Solution
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