3. Consider a bank owning assets whose value one year from now will depend on the state of the economy as described in the table below. Each of the three possible states is equally likely. The bank has deposits worth $110 that are guaranteed by the FDIC.

	Assets	Guaranty	Deposits	Equity
bust	108		110
normal	120		110
boom	132	_	110
average	120		110

1. Complete the table above to show the payments made bv the guarantor and the payments received by the equity holders in each state of the economy, as well as the expected (average) value of the FDIC guarantee and the other three items.

2. Suppose the bank could adjusts its asset portfolio so that its expected value remains unchanged while its risk increases, while the amount of guaranteed deposits is unchanged. Complete the table below reflecting the new situation. By how much have the market (average) values of assets, the guarantee, deposits and equity changed as a result?

		Assets		Guaranty	Deposits	Equity
bust	96
normal	120
boom	144			___	_____	____
average

c) Will shareholders favor this change? Why or why not