ATM Banc has the following liabilities and equity categories: Deposits $9 million, Other liabilities $4 million, Owners’ capital $2 million. . a. What would be the bank’s total liabilities and capital if owners’ capital were half the size of other liabilities? b. If total liabilities and capital were $15.5 million, what would be the amount of the loans?
To solve these questions, we'll follow these steps:
a. Calculate the owners' capital
b. Calculate the total liabilities
c. Determine the amount of loans
Step a: Calculate the owners' capital
Given:
Owners' capital = $2 million
Other liabilities = $4 million
If the owners' capital were half the size of other liabilities, we divide the other liabilities by 2.
Owners' capital = Other liabilities / 2
Owners' capital = $4 million / 2
Owners' capital = $2 million
Step b: Calculate the total liabilities
Given:
Deposits = $9 million
Other liabilities = $4 million
Owners' capital = $2 million
Total liabilities = Deposits + Other liabilities + Owners' capital
Total liabilities = $9 million + $4 million + $2 million
Total liabilities = $15 million
Step c: Determine the amount of loans
Given:
Total liabilities and capital = $15.5 million
Loans = Total liabilities and capital - Owners' capital
Loans = $15.5 million - $2 million
Loans = $13.5 million
Therefore, the answers are:
a. If the owners' capital were half the size of other liabilities, the bank's total liabilities and capital would be $15 million.
b. If total liabilities and capital were $15.5 million, the amount of loans would be $13.5 million.
To answer these questions, we need to perform some calculations using the given information:
a. What would be the bank’s total liabilities and capital if owners’ capital were half the size of other liabilities?
Given:
- Deposits = $9 million
- Other liabilities = $4 million
- Owners’ capital = $2 million
We are asked to find the total liabilities and capital if owners' capital were half the size of other liabilities.
If owners' capital is half the size of other liabilities, then it would be calculated as follows:
Owners’ capital = 1/2 * Other liabilities
Owners’ capital = 1/2 * $4 million
Owners’ capital = $2 million
Now, let's calculate the total liabilities and capital:
Total liabilities = Deposits + Other liabilities
Total liabilities = $9 million + $4 million
Total liabilities = $13 million
Total capital = Owners’ capital
Total capital = $2 million
Therefore, if owners’ capital were half the size of other liabilities, the bank's total liabilities would be $13 million and the total capital would be $2 million.
b. If total liabilities and capital were $15.5 million, what would be the amount of the loans?
Given:
- Total liabilities and capital = $15.5 million
We are asked to find the amount of loans.
To calculate the amount of loans, we need to subtract the total capital from the total liabilities and capital:
Amount of loans = Total liabilities and capital - Total capital
Amount of loans = $15.5 million - $2 million
Amount of loans = $13.5 million
Therefore, if the total liabilities and capital were $15.5 million, the amount of loans would be $13.5 million.