(a)Collateral Asset,CA=$10
Loan,L=$8.5
Let x be the value of haircut.
L=CA-x.CA
8.5=10-x.10
10x=1.5
x=.15=15%
b) After loan total assets=10+8.5=$18.5
Collateral asset=$10
Therefore leverage=18.5/10=1.85
c)The main difference between investment and commercial banks are commercial banks are primarily concerned with deposits or loans for individuals or companies whereas investment banks are concerned with trading securities (stocks,bonds) and IPO for companies or individuals.
Shadow banking is where banking activities are done unregulated whereas investment and commercial banking sectors are regulated.
d)Bailout is defined as giving financial assistance to a corporation or country facing financial failure or bankruptsy.
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