A bank has (in millions): $150 assets,$100 deposits,and $45 debt.If the bank's assets decrease by 5 percent,by how much does the bank's capital change?

Question

Quizplus · Accepted Answer

The bank's capital is calculated as Assets - (Deposits + Debt). Initially, the capital is $150 - ($100 + $45) = $5 million. A 5% decrease in assets is $150 * 0.05 = $7.5 million, so the new assets are $142.5 million. The new capital is $142.5 - $145 = -$2.5 million. The change in capital is from $5 million to -$2.5 million, a decrease of $7.5 million, which is a 150% decrease from the original $5 million capital.

A Bank Has (In Millions): $150 Assets,$100 Deposits,and $45 Debt