If a Bank Increases Its Assets by Adding $1 to Capital

question 117

Multiple Choice

If a bank increases its assets by adding $1 to capital for every $1 added to assets:

• A)The debt-to-equity ratio will increase
• B)The debt-to-equity ratio will remain constant
• C)The debt-to-equity ratio will decrease
• D)The answer cannot be determined from the information in the question

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Definitions:

Market Rate

The prevailing interest rate available in the marketplace for similar financial instruments or loans.

Dividend Growth

The speed of growth in dividend disbursements to stockholders by a firm over successive periods.

Selling

The act of offering goods or services in exchange for money.

Dividend Growth

An increase in the dividend payment issued by a company to its shareholders over time.