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

question 104

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 insured depositors if the insured depositor transfer resolution method is used by the regulators to resolve the bank failure?

• A)$0.
• B)$100 million
• C)$30 million.
• D)$40 million.
• E)$60 million.

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Definitions:

Reaction Rate

The speed at which reactants are converted into products in a chemical reaction.

Activation Energy

The minimum amount of energy required to initiate a chemical reaction, determining the reaction rate.

Arrhenius Equation

A formula that gives the rate of a reaction as a function of temperature, providing a basis for understanding temperature effects on reaction rate constants.

Transition State

A high-energy configuration of atoms during a chemical reaction that represents the point of highest energy along the reaction path.