When the investment bank Bear Stearns collapsed, its leverage ratio was:
A) 2 to 1.
B) 35 to 1.
C) 8 to 1.
D) 16 to 1.
E) 1 to 12.

Question

Quizplus · Accepted Answer

Bear Stearns' leverage ratio was 35 to 1, which means it had $35 of debt for each $1 of its own capital. This high level of leverage made the firm vulnerable when the subprime mortgage market declined and the firm was unable to meet its obligations.

When the Investment Bank Bear Stearns Collapsed, Its Leverage Ratio