What Is the Return on Equity for a Bank That

question 79

Multiple Choice

What is the return on equity for a bank that has an equity multiplier of 12, an interest expense ratio of 5%, and a return on assets of 1.1%?

• A) 5.0%
• B) 13.2%
• C) 8.2%
• D) 26.4%
• E) 0.66%

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Definitions:

Conversion Premium

The extra amount an investor pays to convert a convertible security into a specified number of shares of common stock, above its current market value.

Conversion Price

The predetermined price at which convertible securities can be exchanged for a specified number of common shares.

Current Stock Price

The price at which a stock is trading on the stock market at any given time.

Real Option

The opportunity to undertake certain business initiatives, such as deferring, abandoning, expanding, or contracting a project, based on future events.