Answer to Question #106672 in Accounting for Tom

Question #106672
BIT Bank (in millions) Assets: Reserves $48 Loans $360 Liabilities: Deposits $340 Bank Capital $68 NAT Bank (in millions) Assets Reserves $48 Loans $360 Liabilities Deposits $400 Bank Capital $8 Assume that both BIT Bank and NAT Bank have the same net profit after tax of $8 million a. Which bank (Bank BIT or Bank NAT) is riskier in case of loan depreciation at $60 million? Explain. Show your calculations to explain your answers.
Expert's answer
1
Expert's answer
2020-03-27T10:34:58-0400

 Bank NAT is riskier in case of loan depreciation at $60 million:lower coverage

"\\frac{300}{400}=0.75"  NAT Bank


"\\frac{300}{340}=0.88" BIT Bank


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