Suppose that Mid-Size Bank has the balance sheet in Table 1, and is required by law to

Question:

Suppose that Mid-Size Bank has the 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.)

Liabilities and Shareholders' Equity Assets $ 600 million 40 million Property and Buildings Checking Account Deposits $

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...

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