If a bank has an ROA of 1% and an equity to total assets ratio of 10%, what is the bank's equity multiplier, and what is its ROE?

Name: If a bank has an ROA of 1% and an equity to total assets ratio of 10%, what is the bank's equity multiplier, and what is its ROE?
Brand: Quizplus
Rating: 4.9 (47 reviews)

Question

Quizplus · Accepted Answer

The equity multiplier (EM) is calculated as the inverse of the equity to total assets ratio, which is 1 / 10% = 10. The Return on Equity (ROE) can be calculated using the formula ROE = ROA * EM, which gives 1% * 10 = 10%.

If a Bank Has an ROA of 1% and an Equity