00:01
First of all, in this question, we have to see that let's go through the scenario step by step.
00:04
Before the housing crisis, the average home price, the imaginary bank has loan on houses with an average price of $400 ,000.
00:13
Then the healthy bank balance sheet is assets, cash is $50 million, loans is $600 million, investment is $100 million and buildings is $40 million.
00:25
These are all the assets of healthy bank balance sheet.
00:30
Now coming to the liabilities, so liabilities are deposits $650 million, borrowings $80 million and equity is $110 million.
00:41
Now after housing crisis, we see that average home price after crisis due to the house housing crisis, the average home price is cut in half to $200 ,000.
00:54
Then the new bank balance sheet with loans reduced due to the housing crisis, assets is cash $50 million and loans is $300 million, investment is $100 million, building is $40 million and their liabilities are deposits $650 million, borrowings $80 million, equity $110 million...