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Business, 11.03.2020 22:14 ninatello081017

Yes, the investors should be excited to get such a return! However, what if there is an increase in defaults, so that the bank's assets (loans) fall in value by, say, 10%, or $7,200,000×0.1=$720,000 ? The value of loans outstanding would decline to $7,200,000−$720,000=$6,480,000 , and total assets would be $1,000,000+$6,480,000=$7,480,000 . Consequently, the stockholders' equity will decline to $7,480,000−$8,000,000=−$520,000 .

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