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:

Withdrawals

The act of removing funds from an account or investment.

Monthly Withdrawals

Monthly withdrawals refer to the act of removing a specific amount of money from an account or investment at regular monthly intervals.

Compounded Monthly

Refers to the process of applying interest on both the initial principal and the accumulated interest from previous periods on a monthly basis.

Withdraw

The act of removing funds from an account.