As a Result of Loan Write-Offs, Bank a Has to Be

question 87

Multiple Choice

As a result of loan write-offs, Bank A has to be liquidated by the regulators.The book value of the assets and liabilities of the bank is presented below (in millions of dollars) .The market value of the loans has been estimated at $240 million. $$\begin{array} { | l | l | l | l | } \hline \text { Loans (book value) } & \$ 340 & \text { Insured Deposits } & \$ 200 \\\hline & & \text { Uninsured Deposits } & \$ 100 \\\hline & & \text { Equity } & \$ 40 \\\hline\end{array}$$ What is the cost to the FDIC if the insured depositor transfer resolution method is used by the regulators to resolve the bank failure?

• A)$0.
• B)$20 million.
• C)$30 million.
• D)$40 million.
• E)$60 million.

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