Answer:
<em>Recapitalization will be a better policy than buying the troubles assets because, buying troubled assets will at most case provide a bank liquidity but not necessarily a positive capital.</em>
Explanation:
<em>From the question, we recall the following,</em>
<em>The firm has three assets which are 50 of untroubled assets, 25 of troubled assets and 25 of treasury bonds</em>
The Securitized assets will be now 50-25= 25
The value other assets will remain at= 50
The Treasury bonds will be 50-25=25
The Short term credit will remain at= 80
The Capital will be =20
Securitized assets. 25. Short term credit 80
Other assets.=50 and capital= 20
The Treasury bonds=25