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    Question

    How do nonperforming assets (NPAs) impact a bank's

    balance sheet?
    A Increase profitability Correct Answer Incorrect Answer
    B Improve asset quality Correct Answer Incorrect Answer
    C Reduce loan loss provisions Correct Answer Incorrect Answer
    D Decrease overall asset quality and profitability Correct Answer Incorrect Answer
    E Enhance liquidity Correct Answer Incorrect Answer

    Solution

    Nonperforming assets (NPAs) negatively impact a bank's balance sheet by decreasing overall asset quality and profitability, requiring higher loan loss provisions.

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