The following table shows the balance sheet for Poor Baby Bank.

What happens to stockholders' equity if there is an economic downturn and as a result, Poor Baby Bank loses 20 percent of its long-term investments and has to borrow another $10 from other banks?

It decreases to $0 and the bank becomes insolvent

It decreases to -$10 and the bank becomes insolvent

It increases to $10

It increases to -$5.4 and the bank becomes insolvent

Assets Liabilities and stockholders' equity Reserves $27 Demand deposits Long-term investments $135 Borrowing from other banks Total liabilities $90 $45 ? Stockholders' equity ? Total liabilities + stockholders' equity ? ? Total assets