Consider the following balance sheet for a hypothetical financial institution, Bank A and Bank B Bank As
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Question:
Canadian dollars
Assets Liabilities
Bonds 500
Deposits 480
Equity 2
Total 500 Total 500
a) Calculate the leverage ratio for the bank
b) Calculate the capital ratio for the bank
c) Suppose that an increase in the rate of interest decreased the value of assets by 3%. Show how the leverage ratio and capital ratio would change as a result. Has the risk of insolvency decreased or increased?
Related Book For
Cost Management Measuring Monitoring And Motivating Performance
ISBN: 9781118168875
2nd Canadian Edition
Authors: Leslie G. Eldenburg, Susan Wolcott, Liang Hsuan Chen, Gail Cook
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