Difference between payoff and purchase and assumption method

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1. Explain the primary difference between the "payoff" and the "purchase and assumption" methods of handling failed banks.

2. Explain the role of a collateral in the credit market. Is it helpful?

3. You are the manager of a bank. It has the following balance sheet:

Assets                                         Liabilities                

Reserves      $ 100 million            Checkable deposits     $400 million

Securities        100 million       

Loans              300 million           Bank capital       1000 million

If the required reserve ratio is 15%, what actions should the bank manager take if there is an unexpected deposit outflow of $80 million?

Reference no: EM131520992

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