A bank has (in millions): $300 reserves, $700 loans, $500 securities, $1200 deposits, $100 debt, and $300 capital. How much is the bank's leverage ratio?

Question

Quizplus · Accepted Answer

The leverage ratio is calculated as the total assets divided by the total equity (capital). Here, total assets = $300 (reserves) + $700 (loans) + $500 (securities) = $1500 million. Total equity (capital) = $300 million. Thus, the leverage ratio = $1500 / $300 = 5.

A Bank Has (In Millions): $300 Reserves, $700 Loans, $500