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:

Sale-On-Approval

A contractual arrangement where the buyer takes possession of goods with the right to return them within a specified period if they are not satisfactory.

Buyer to Take Possession

The obligation of a buyer to take control or ownership of purchased goods or property.

Used Car Problems

Issues or defects associated with purchasing a pre-owned vehicle, often concerning its condition, history, and reliability.

Voidable Title

A legal concept where a title to property or goods can be declared void at the discretion of a court, often due to issues like fraud.