A bank has (in millions): $200 assets,$140 deposits,and $40 debt.If the bank's assets decrease by 10 percent,by how much does the bank's capital change?
A) It decreases by 100 percent.
B) It decreases by 5 percent.
C) It increases by 100 percent.
D) It increases by 5 percent.

Question

Quizplus · Accepted Answer

The bank's capital is calculated as Assets - (Deposits + Debt). Initially, the capital is $200 - ($140 + $40) = $20 million. If assets decrease by 10%, they become $180 million. The new capital is $180 - ($140 + $40) = $0 million. The capital decreases by $20 million, which is a 100% decrease from the initial $20 million.

A Bank Has (In Millions): $200 Assets,$140 Deposits,and $40 Debt