What is the leverage ratio in each bank

Assignment Help Microeconomics
Reference no: EM131634489

Question: Systemic risk: Consider the following balance sheets for two hypothetical financial institutions, bank B and bank C:

2066_3.png

(a) Fill in the missing entries in the balance sheets (denoted ???).

(b) What is the leverage ratio in each bank?

(c) Suppose housing prices fall sharply and the mortgage-backed securities held by bank C fall in value to only $500. What happens to bank C's net worth?

(d) The shortfall in bank C's equity means that it cannot repay the loan it received from bank B. Assume bank C pays back as much as it can, while still making good on its deposits. What happens to the net worth of bank B?

(e) Discuss briefly how this is related to systemic risk.

Reference no: EM131634489

Questions Cloud

Discuss the components of the court : Discuss the components of the court and its approach to dealing with these special offenders based upon criminological thought
What is the current state of the economy : What is the current state of the economy that you have chosen? Collect the latest available data on nominal GDP, real GDP, per capita real GDP
Define juvenile court and corrections processes : Outline at least three differences between the court and corrections processes for juveniles compared to these processes for adults
Explain the strategic approach you used to segment the marke : Explain the strategic approach you used to segment the market, and justify why you have selected particular target market segment(s) in the chosen market
What is the leverage ratio in each bank : Suppose housing prices fall sharply and the mortgage-backed securities held by bank C fall in value to only $500. What happens to bank C's net worth?
Define any criminal justice organization : Define what you believe leadership to be in any criminal justice organization. Explain how your definitions could best be applied to improve your own criminal
Examine the efficacy of us welfare programs : Examine the efficacy of U.S. welfare programs. What do such programs intend to accomplish?
Find a present-day example of islamic calligraphy to discuss : If you discuss a work of calligraphy, find a present-day example of Islamic calligraphy to discuss. What are the differences and similarities?
Discuss technologies in combatting digital crime : Explain the existing challenges that result from the independent nature of the law enforcement agencies within the U.S. with regards to computer crimes

Reviews

Write a Review

Microeconomics Questions & Answers

  Describe effect of decrease in the cost of the labor input

With a series of benefit cuts across many firms throughout the economy, some economists argue that nominal wage rates, a major cost of inputs for firms, have been decreasing.

  Suppose that business is visible and significant member of

assume that your business is visible and an important member of the community. would the government encourage a

  1 which of these economic variables is procyclical and

1. which of these economic variables is procyclical and coincident?consumer spending stock pricesthe government bond

  Why do most economists dislike these laws

Many states have usury laws, which place a ceiling on interest rates. Why do most economists dislike these laws?

  Why innovation is at heart of creating advanatage

Explain in one or two paragraphs why innovation is at the heart of creating and sustaining competitive advantage for firms. You need to mention the interrelationships between innovation and productivity

  When market price is 40, break-even level of output is ten

A competitive firm has the following quadratic cost function: TC = aQ2+ bQ + 100 ,Determine a and b if the following two conditions are satisfied- When the market price is 60, the profit maximizing level of output is 15.

  Cross-price elasticity of demand between mcintosh and golden

Suppose that the cross-price elasticity of demand between McIntosh and Golden Delicious apples is 0.8, between apples and apple juice is 0.5, between apples and cheese is 0.4, and between apples and beer is 0.1. What can you say about the rel..

  Write an equation relating y and r and graph it

Consider the following aggregate consumption and investment function for a closed economy: C = 15 + 0.70Y , I = 30 + 0.1Y - 7.5 rHere, investment is expressed as a function of income Y and interest rate r (expressed as percentage).

  Combination of techniques to manage that risk

Identify a risk situation and discuss an appropriate technique or combination of techniques to manage that risk

  How can one use the put-call parity result to solve problem

You are pension fund manager with a problem. You are constrained by regulation to hold 50% of your pension portfolio in shares, but you are very worried about a stock market crash and would like to hold only riskless bonds. You are not constrained..

  Q we observe that the equilibrium price of a cup of coffee

q. we observe that the equilibrium price of a cup of coffee sold in cafes rises but the equilibrium quantity i.e. cups

  What learned theories of international trade does

If a poor country invented a brand new product and marketed and exported to other poor countries. What learned theories of international trade does this occurrence contradict

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd