What is the maximum amount of write-downs (defaults) the bank could sustain without becoming insolvent (bankrupt)?
A) $0
B) $260
C) $600
D) $1060

Question

Quizplus · Accepted Answer

The maximum amount of write-downs a bank can sustain without becoming insolvent is determined by its equity. Equity acts as a buffer for losses. If the bank's losses exceed its equity, it becomes insolvent. Therefore, the correct answer is the amount that matches the bank's equity or the maximum losses it can cover without depleting its assets below its liabilities.

What Is the Maximum Amount of Write-Downs (Defaults) the Bank