Bank L operates with an equity to asset ratio of 6 percent, while Bank S operates with

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Bank L operates with an equity to asset ratio of 6 percent, while Bank S operates with a similar ratio of 10 percent. Calculate the equity multiplier for each bank and the corresponding return on equity if each bank earns 1.5 percent on assets. Suppose, instead, that both banks report an ROA of 1.2 percent. What does this suggest about financial leverage?
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Bank Management

ISBN: 978-1133494683

8th edition

Authors: Timothy W. Koch, S. Scott MacDonald

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