Problem 2 Consider the following balance sheet of a private bank. Assets Liabilities Reserves $200 | Deposits $350 Loans $700 | Debt $150 Securities $100 | Capital $500 1. What is the leverage ratio of this bank? What is its capital ratio? What do these numbers mean? 2. Consider a $50 increase in the value of the securities held by this bank. (a) Compute the new balance sheet of the bank. (b) What is the percentage change in the value of the bank's assets? (c) What is the percentage change in the value of the bank's capital? (d) How are the previous numbers related to the initial leverage ratio?

Problem 2 Consider the following balance sheet of a private bank. Assets Liabilities Reserves $200 | Deposits $350 Loans $700 | Debt $150 Securities $100 | Capital $500 1. What is the leverage ratio of this bank? What is its capital ratio? What do these numbers mean? 2. Consider a $50 increase in the value of the securities held by this bank. (a) Compute the new balance sheet of the bank. (b) What is the percentage change in the value of the bank's assets? (c) What is the percentage change in the value of the bank's capital? (d) How are the previous numbers related to the initial leverage ratio?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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