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Construct a Bank Balance Sheet with the Following Items: Reserves

Question 60

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Construct a bank balance sheet with the following items: reserves, deposits, loans, securities, capital, and debt. Choose values so that the reserve-deposit ratio is 10 percent and the leverage ratio is 10. Give an example of a change in asset values that would push bank capital to zero. What happens when bank capital is gone?

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Many values are possible in the balance ...

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