A bank has (in millions): $400 assets, $280 deposits, and $80 debt. If the bank's assets decrease by 10 percent, by how much does the bank's capital change?

Question

Quizplus · Accepted Answer

The bank's initial capital is assets minus liabilities (deposits + debt), which is $400 - ($280 + $80) = $40 million. After a 10% decrease, assets are $360 million. The new capital is $360 - ($280 + $80) = $0. The capital decreases from $40 million to $0, which is a 100% decrease.

A Bank Has (In Millions): $400 Assets, $280 Deposits, and $80