Which of the Following Are Problems in Using the Leverage

question 33

Multiple Choice

Which of the following are problems in using the leverage ratio as a measure of capital adequacy?

• A)Even with a low leverage ratio, an FI could have a negative market value net worth.
• B)The different types of risks, such as credit or interest rate risk are not captured.
• C)Off-balance-sheet activities are not captured.
• D)Even with a low leverage ratio, an FI could have a negative market value net worth, the different types of risks, such as credit or interest rate risk are not captured and off-balance-sheet activities are not captured.

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Definitions:

Behavioral Contracting

A therapy technique where an agreement is made between a client and a therapist, outlining behaviors to change and the consequences of actions.

Free Association

A therapeutic technique in psychoanalysis where the patient verbalizes thoughts as they occur, without censorship or filtering, to uncover unconscious processes.

Positive Regard

Warmth, affection, love, and respect that come from significant others in one’s life.

Modeling Techniques

Methods used in various fields to represent, simulate, or emulate real-world situations or complex systems.