The 1st fill in the blank answer options are (increase, decrease). 2nd fill in t
ID: 1110646 • Letter: T
Question
The 1st fill in the blank answer options are (increase, decrease).
2nd fill in the blank answer options are (capital, debt, deposits, loans, reserves)
3rd fill in the blank answer options are same as the 4th fill in the blank drop down list in the picture.
9. Bank leverage Use the information presented in Southwestern Mutual Bank's balance sheet to answer the following questions Bank's Balance Sheet Liabilities and Owners' Equity $1,200 $200 Securities 750 Capital (owners' equity) 100 Reserves 150 Deposits Loans S600 Debt Suppose the owners of the bank borrow $100 to supplement their existing reserves. This would increase the reserves account and the account. This would also bring the leverage ratio from its initial value of to a new value of 15.00 16.00 17.10 19.40 Which of the following is true of the capital requirement? Check alf that apply Its intended goal is to protect the interests of the depositors. O Its intended goal is to protect the interests of those who hold equity in the bank. O It specifies a minimum leverage ratio for all banks.Explanation / Answer
Borrowings will increase the debt account as it will increase the bank’s liabilities.
leverage ratio is the ratio of total debt to total owner’s equity initial value is 200/100 = 2. While the new leverage value is 300/100 =3.
A capital requirement is the standardized requirement placed for banks and other institutions that determines how much liquidity is required to be held for a certain level of assets. It aims at protecting the interest of the depositors by not letting the banks to take excessive risks. It also protects the interest of those who hold equity in the bank. It specifies a minimum leverage for all banks so they are able to pay for their liabilities.
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