Suppose That a Bank Initially Has a Leverage Ratio of 8

question 98

Multiple Choice

Suppose that a bank initially has a leverage ratio of 8 to 1.If this bank increases its capital by $1million and its assets by $10 million, then the bank's:

• A)Risk increases and its leverage decreases
• B)Liabilities decrease and its leverage increases
• C)Leverage decreases and its liabilities increase
• D)Leverage and risk increases

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Definitions:

Corrosion

The process by which metals deteriorate due to reactions with chemicals in their environment.

Body Fluids

Liquids originating from inside the bodies of living organisms that include such substances as blood, urine, and saliva.

Surgical Procedure

A medical intervention involving an incision with instruments, performed to repair damage or arrest disease in a living body.

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