Consider the following balance sheet of a financial institution (FI): 1 Assume now that 100 in loan commitments are exercised. How is the above balance sheet changed if: i) bank satisfies the loan commitments by using cash; ii) a combination of borrowed funds and cash in equal proportion. iii) Suppose now that the FI can finance the increase in loans only by selling its existing loans at 20% of their value (i.e., 20 cent per dollar). What should be the minimum size of exercised loan commitments above which the FI becomes insolvent
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