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Economics

Two banks have lent $20million each to a country in an Emerging Market. Bank A has total assets of $220 million and a capital to total assets ratio of 7 percent. Bank B has total assets of $350 million and a capital to total assets ratio of 6 percent. Both banks that each of their entire $20 million loan package will be written off as bad loans.

a. Will any of the two banks survive this crisis? Explain carefully.

b. Is the problem one of illiquidity or insolvency? Explain.

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M9444300

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