Ask Question, Ask an Expert

+61-413 786 465

info@mywordsolution.com

Ask Business Economics Expert

Economics


Home >> Business Economics

Suppose State Bank's initial balance sheet is as follows:

Assets                                       Liabilities and Owners' Equity

Reserves    $100                      Deposits                          $250

Loans          $400                     Debt                                 $450 

Securities   $300                     Capital(Owners'Equity)  $100

a. What is State Bank's leverage ratio?

b. Suppose that some of State Bank's securities were bonds whose value was linked to riskysubprime mortgages. When some homeowners could not pay their monthly mortgagepayments, the value of these bonds fell.  Suppose the value of State Bank's securities fell by$25.  What is the percentage reduction in the value of its securities? What is the percentage reduction in the value of its capital?

c. Now suppose that some of State Bank's car loans could not be repaid because the carowners lost their jobs during the recession. If the value of State Bank's loans also fell by$25, what is the value of State Bank's capital now?

d. In order to ensure that banks can pay their depositors, bank regulators require banks tomaintain a minimum ratio of bank capital to assets, called capital requirements. Suppose that State Bank's capital requirement was 8%. Did the bank meet this requirement in partc?  Show your calculation.

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M92235775
  • Price:- $10

Priced at Now at $10, Verified Solution

Have any Question?


Related Questions in Business Economics

Explain the key differences between the virtual value chain

Explain the key differences between the virtual value chain and a physical value chain. How can firms exploit the virtual value chain to gain a competitive advantage

Suppose that the value of the us dollarnbsp yesterday

Suppose that the value of the US dollar? ($) yesterday was? $1 = 4 yen. Today the exchange rate changed such that? $1 = 2 Yen. Given that the US dollar has? depreciated, the aggregate demand in the United States should A ...

Why are common stock and bond yields important what happens

Why are common stock and bond yields important? What happens if bond interests aren´t paid and what is the difference between common stock and bond investors?

Assume that a perfectly competitive firm has the following

Assume that a perfectly competitive firm has the following revenue and cost functions: TC= 5625 +5Q + 0.01Q^2 AVC=5 + 0.01Q MC=5 + 0.02Q TR=20Q A) What is the level of output that maximizes profits, if any? Compute profi ...

What is bitcoin and why does it have value is bitcoin money

What is Bitcoin and why does it have value? Is Bitcoin money? Explain why it does or does not satisfy the three conditions it must meet to be considered money.

Eventnbspanbspoccurs with probability 04 if

Event  A  occurs with probability 0.4. If events  A  and  B  are not disjoint, then a P ( B )   0.6 b  P ( B ) ≥ 0.6. c  P ( B ) > 0.6. d  P ( B ) Step 1: You are tossing a balanced die that has probability  of coming up ...

A brewery pulls 905 bottles of beer to sample them for

A brewery pulls 905 bottles of beer to sample them for quality control. In the past there has been a 0.12 probability that a bottle of beer is defective. Assuming this trend continues, what is the probability that fewer ...

Would it ever be rational for a firm to retain an employee

Would it ever be rational for a firm to retain an employee whose current marginal revenue product is less than her current wage? Explain.

A suppose that for a given year national saving in a

a. Suppose that, for a given year, national saving in a country (an open economy) equals 100, private consumption equals 50, and government consumption equals 20. What is the level of output in this country in this year? ...

Cnsider taking a random sample from a nmicrosigma 2

Consider taking a random sample from a N(µ,σ 2 ) distribution. Consider testing the hypothesis H0 : µ = 63 versus the alternative HA : µ 6= 63. Suppose that a random sample of size 16 is taken, σ is known to be 8, and th ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As

Follow Us

© Copyright 2013-14 mywordsolution.com All rights reserved