Banks G and H Are the Same Size and Have

question 10

Multiple Choice

Banks G and H are the same size and have similar operations. Bank G holds the minimum level of capital, and Bank H holds a higher level of capital. Bank G's return on equity is probably ____ volatile than that of Bank H. Bank G's risk premium is probably ____ than that of Bank H.

• A)less; lower
• B)less; higher
• C)more; higher
• D)more; lower

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Definitions:

Cash Account

An account that records all transactions involving cash inflows and outflows within a company.

Accounting Equation

The foundational formula in accounting representing assets equal to the sum of liabilities and shareholders' equity.

Initial Investment

The initial amount of money spent to start a project, purchase an asset, or invest in a business venture.

Accounting Equation

The foundational principle of accounting that states assets equal liabilities plus equity.