For the following questions use the information in the followingtable.
-Given the information in Table 10.2,if the value of this bank's investments decrease by $1,000,what is the approximate leverage ratio of this bank?
A)10.60
B)3.87
C)8.60
D)2.78
E)not enough information

Question

For the following questions use the information in the followingtable. 
-Given the information in Table 10.2,if the value of this bank's investments decrease by $1,000,what is the approximate leverage ratio of this bank?
A)10.60 
B)3.87 
C)8.60 
D)2.78 
E)not enough information

Quizplus · Accepted Answer

The leverage ratio is calculated by dividing the bank's total assets by its total equity. From Table 10.2, we can see that the bank's total assets are $10,000 and its total equity is $940. Therefore, the leverage ratio is $10,000/$940 = 10.60. If the value of the bank's investments decreases by $1,000, the bank's total assets will decrease to $9,000. Therefore, the new leverage ratio will be $9,000/$940 = 9.57.

For the Following Questions Use the Information in the Followingtable