Explain the primary difference between the payoff and the


1. Explain the primary difference between the "payoff" and the "purchase and assumption" methods of handling failed banks.

2. Explain the role of a collateral in the credit market. Is it helpful?

3. You are the manager of a bank. It has the following balance sheet:

Assets                                         Liabilities                

Reserves      $ 100 million            Checkable deposits     $400 million

Securities        100 million       

Loans              300 million           Bank capital       1000 million

If the required reserve ratio is 15%, what actions should the bank manager take if there is an unexpected deposit outflow of $80 million?

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Financial Management: Explain the primary difference between the payoff and the
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