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Suppose State Bank's initial balance sheet is as follows: What is State Bank's leverage ratio? Suppose that some of State 3ank's securities were bonds whose

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Suppose State Bank's initial balance sheet is as follows: What is State Bank's leverage ratio? Suppose that some of State 3ank's securities were bonds whose value v/as linked to risky subprime mortgages. When some homeowners could not pay their monthly mortgage payments, the value of these bonds fell. Suppose the value of State Bank's securities fell by $50. What is the percentage reduction in the value of its securities? What is the percentage reduction in the value of its capital? Now suppose that some of State Bank's car loans could not be repaid because the car owners lost their jobs during the recession. If the value of State Bank's loans also fell by $30, what is the value of State Bank's capital now (that is, after both falls in value)? In order to ensure that banks can pay their depositors, bank regulators require banks to maintain a minimum ratio of bank capital to assets, called capital requirements. Suppose that State Bank's capital requirement was 6%. Did the bank meet this requirement in part c? Show your calculation

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