Early the next day, the bank invests $50 million of its excess reserves in commercial...
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Early the next day, the bank invests $50 million of its excess reserves in commercial loans. Later that day, terrible news hits the mortgage markets, and mortgage rates jump to 13%, implying a present value of Oldhats current mortgage holdings of $124,798 per mortgage. Bank regulators force Oldhat to sell its mortgages to recognize the fair market value. What does Oldhats balance sheet look like? How do these events affect its capital position?
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