Bank A has a loan to deposit ratio of 110%, core deposits equal 55% of total assets, and borrowed funds are 25% of assets. Bank B has a loan to deposit ratio of 80%. Core deposits are 65% of assets and borrowed funds are 5% of assets. Which bank has more liquidity risk? Ceteris paribus, which bank will probably be more profitable when interest rates are low?
A) Bank A; Bank A
B) Bank A; Bank B
C) Bank B; Bank A
D) Bank B; Bank B
E) You can't tell
Correct Answer:
Verified
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