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Question
Bank A has a loan to deposit ratio of 110%, core deposits equal 55% of total assets, and borrowed funds are 25% of assets. Bank B has a loan to deposit ratio of 80%. Core deposits are 65% of assets and borrowed funds are 5% of assets. Which bank has more liquidity risk? Ceteris paribus, which bank will probably be more profitable when interest rates are low?
A. Bank A; Bank A
B. Bank A; Bank B
C. Bank B; Bank A
D. Bank B; Bank B
E. You can't tell
Answer
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