20-97 Which of the Following Is NOT a Criticism of the Leverage

question 130

Multiple Choice

20-97 Which of the following is NOT a criticism of the leverage ratio as a measure of capital?

• A)Capital is not required to be held to meet the risks of off-balance-sheet activities.
• B)The ratio sends a definitive signal of the level of capital adequacy according to FDICIA.
• C)The ratio fails to take into account the different degrees of credit and interest rate risk of the assets.
• D)A positive leverage ratio could occur even with a negative economic value of net worth.
• E)Answers A and C only.

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