Refer to the following table when answering
Table 10.2: Hypothetical Bank Sheet ($ millions)
$\begin{array}{lr|lr}
{\text { Column A }} &&{\text { Column B }} \
\hline \text { Loans } & \$ 6,800 & \text { Deposits } & \$ 7,500 \
\text { Investments }&3,700 & \text { Short Term Debt } & 300 \
\begin{array}{l}

\text { Cash \& } \
\text { Reserves }
\end{array} &1,100 & \text { long Term Debt } &1,800 \
\hline
\end{array}$
-Given the information in Table 10.2, if the value of this bank's investments decreases by $1,000, what is the approximate leverage ratio of this bank?
A) 9.60
B) 3.87
C) 8.60
D) 2.78
E) Not enough information is given.

Question

Refer to the following table when answering 
Table 10.2: Hypothetical Bank Sheet ($ millions)
 $\begin{array}{lr|lr}
{\text { Column A }} &&{\text { Column B }} \
\hline \text { Loans } & \$ 6,800 & \text { Deposits } & \$ 7,500 \
\text { Investments }&3,700 & \text { Short Term Debt } & 300  \
\begin{array}{l}

\text { Cash \& } \
\text { Reserves }
\end{array} &1,100 & \text { long Term Debt } &1,800 \
\hline
\end{array}$
-Given the information in Table 10.2, if the value of this bank's investments decreases by $1,000, what is the approximate leverage ratio of this bank?
A) 9.60
B) 3.87
C) 8.60
D) 2.78
E) Not enough information is given.

Quizplus · Accepted Answer

The leverage ratio is calculated by dividing total assets by total equity. In this case, total assets are $6,800 + $3,700 + $1,100 = $11,600. Total equity is not given in the table, but we can calculate it by subtracting total liabilities from total assets. Total liabilities are $300 + $1,800 = $2,100. Therefore, total equity is $11,600 - $2,100 = $9,500. The leverage ratio is $11,600 / $9,500 = 9.60.

Refer to the Following Table When Answering Table 10

Refer to the Following Table When Answering
Table 10