What is the expected value of the equity

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Question: A bank has $20 million in assets (market value), $18 million in government-insured liabilities (market value), and $2 million in equity (market value). The bank is considering a project, funded with $10 million in cash (an asset) that has a 20% chance of increasing the market value of the bank's assets to $40 million and an 80% chance of decreasing the value of assets to $10 million.

What is the expected value of the equity if the project is accepted?

What is the value of the equity if the bank does nothing (i.e., from the original balance sheet?)

Reference no: EM131795812

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