Bank A starts with the following balance sheet: Panel (a) Before Investment Loss

Question

Bank A starts with the following balance sheet: Panel (a) Before Investment Loss (Billions of Dollars) Assets Liabilities and stockholders' equity Reserves & cash equivalents 1 Demand deposits 9 Long-term investments 10 Total liabilities 9 Stockholders' equity 2 Total assets 11 Total liabilities + stockholders' equity 11 Which of the following is NOT true after the bank suffers a loss of 15% in the value of long-term investments? Stockholder's equity decrease Total assets decrease The bank becomes insolvent Stockholder's equity is positive

Explanation / Answer

The stcokholder's equity is positive, this statement is not true.

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