Show the balance sheet of happy bank

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Happy Bank starts with $200 in bank capital. It then take-in $800 in deposits. It keeps 12.5 percent of deposits in reserve. It uses the rest of its assets to make bank loans.

-Show the balance sheet of Happy bank.

-What is Happy Banks leverage ratio

-Suppose that 10 percent of the borrowers from happy bank default and these bank loans become worthless. Show the banks new balance sheet.

-By what percentage do the banks total assets decline? By what percentage does the bank's capital decline? Which change is larger? Why?

Reference no: EM132601246

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