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Macroeconomics 6th Edition by Robert Hall,Marc Lieberman
Edition 6ISBN: 978-1111822354Macroeconomics 6th Edition by Robert Hall,Marc Lieberman
Edition 6ISBN: 978-1111822354 Exercise 11
Suppose that Mid-Size Bank has the balance sheet in Table 1, and is required by law to have 20 percent of its total assets as bank capital.
a. What percentage of total assets is Mid-Size's current level of capital?
b. Suppose Mid-Size issues new shares of stock, which it sells for $75 million. It then lends out the $75 million. Is Mid-Size meeting its capital requirement now? Why or why not?
c. [Harder] How many dollars would Mid-Size have to raise by selling shares of stock to exactly meet its capital requirement? (Assume it will always lend out the proceeds of any stock sale.)
Reference:
![Suppose that Mid-Size Bank has the balance sheet in Table 1, and is required by law to have 20 percent of its total assets as bank capital. a. What percentage of total assets is Mid-Size's current level of capital? b. Suppose Mid-Size issues new shares of stock, which it sells for $75 million. It then lends out the $75 million. Is Mid-Size meeting its capital requirement now? Why or why not? c. [Harder] How many dollars would Mid-Size have to raise by selling shares of stock to exactly meet its capital requirement? (Assume it will always lend out the proceeds of any stock sale.) Reference:](https://d2lvgg3v3hfg70.cloudfront.net/SM2831/11eb7367_8afc_2c5a_9c10_e79420d1b519_SM2831_00.jpg)
a. What percentage of total assets is Mid-Size's current level of capital?
b. Suppose Mid-Size issues new shares of stock, which it sells for $75 million. It then lends out the $75 million. Is Mid-Size meeting its capital requirement now? Why or why not?
c. [Harder] How many dollars would Mid-Size have to raise by selling shares of stock to exactly meet its capital requirement? (Assume it will always lend out the proceeds of any stock sale.)
Reference:
Explanation
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(a)It is given that bank is required to ...
Macroeconomics 6th Edition by Robert Hall,Marc Lieberman
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