Use the balance sheet for Bank 1 below. Suppose depositors panic and want to withdrawal 25 million from the bank. Bank 1 is only able to receive $0.70 on the dollar if it sells nonliquid assets to meet the customer withdrawals. What is the capital loss as a result of selling the nonliquid assets?

 

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Cash (Reserves) Nonliquid Assets Total Assets Assets Bank 1 Liabilities & Equity 20,000,000 Deposits 80,000,000 Capital 100,000,000 Total Liabilities & Equity 90,000,000 10,000,000 100,000,000 Cash (Reserves) Nonliquid Assets Total Assets Assets Bank 1 Liabilities & Equity 20,000,000 Deposits 80,000,000 Capital 100,000,000 Total Liabilities & Equity 90,000,000 10,000,000 100,000,000

Answer rating: 100% (QA)

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