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

question 37

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 uninsured depositors 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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