Suppose an Investment Bank Has a Leverage Ratio of 10

question 83

Multiple Choice

Suppose an investment bank has a leverage ratio of 10 and the value of its securities decline by 10%.What happens to its return on equity investment?

• A) declines by 1%
• B) increases by 1%
• C) declines by 100%
• D) increases by 100%

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Definitions:

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