Consider a bank with $500 million in loans and $375 in deposits. Calculate the bank's net worth. Calculate the bank's leverage ratio. Suppose that $50 million of the bank's loans fail and become worthless. What is the bank's net worth now? What is its rate of return on equity? Imagine that the bank still has $500 million in loans, but now has deposits worth $275 What is the bank's new leverage ratio? Suppose $50 million of the bank's loans fail. Calculate the bank's new rate of return on equity.

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