Question
Reserves $10 million Deposits $90 million, Loans $90 million Bank capital $10 million a.Bank XYZ can withstand a 5% drop in loan value and still
Reserves $10 million Deposits $90 million,
Loans $90 million Bank capital $10 million
a.Bank XYZ can withstand a 5% drop in loan value and still be "well capitalized". Well capitalized means an Equity/Asset ratio of 6%.
True or False
b.Bank XYZ can withstand a 20% drop in asset value and still be "well capitalized". Well capitalized means an Equity/Asset ratio of 8%.
True or False.
c.Bank XYZ can withstand a 10% drop in asset value and still be "well capitalized". Well capitalized means an Equity/Asset ratio of 8%.
True or False.
Please explain the answers and calculations for all three questions. Thank you
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Foundations of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
10th Canadian edition
1259261018, 1259261015, 978-1259024979
