-If Problem Loans Reduce the Market Value of the Loan

$$\begin{array} { l l l l } \text { Securities (at par) } & \$ 250 & \text { Deposits } & \$ 975 \\\text { Loans (at par) } & \$ 760 & \text { Capital } & \$ 35\end{array}$$
-If problem loans reduce the market value of the loan portfolio by 25 percent, what is the value of regulatory defined (book value) capital?

A) $35 million.
B) -$155 million.
C) $7 million.
D) -$7 million.
E) $0.

Correct Answer:

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