A commercial bank has capital of $5000 and a leverage ratio of 10. If the value of the bank’s assets increases by 5%, then its capital has _____ to ______. Select one: a. increased / $5,250 b. increased / $5,500 c. decreased / $4,500 d. decreased / $4,000 e. decreased / $2,500

Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter27: Money And Banking
Section: Chapter Questions
Problem 18RQ: What is the risk if a bank does not diversify its loans?
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Question 2 B

A commercial bank has capital of $5000 and a leverage ratio of 10. If the value of the bank’s assets increases by 5%, then its capital has _____ to ______.

Select one:

a. increased / $5,250

b. increased / $5,500

c. decreased / $4,500

d. decreased / $4,000

e. decreased / $2,500

 

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