Suppose Chase Bank holds following assets, 8 million bank capital, which are composed of the following:

Required Reserves: $15 million

Excess Reserves: $5 million

Mortgage Loans: $100 million

Corporate Bonds: $60 million

Stocks: $60 million

Commodities: $10 million

If the price of commodities suddenly increased sharply, would Universal Bank be better off with a mark-to-market accounting system or the historical-cost system?

What do your answer to (b) and (c) tell you about the trade offs between the two accounting systems?