Question

Use the information presented in Southwestern Mutual Bank's balance sheet to answer the following questions.

Bank's Balance Sheet
Assets		Liabilities and Owners' Equity
Reserves	$150	Deposits	$1,200
Loans	$600	Debt	$200
Securities	$750	Capital (owners' equity)	$100

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   .

Which of the following is true of the capital requirement? Check all that apply.

Its intended goal is to protect the interests of those who hold equity in the bank.

It specifies a minimum leverage ratio for all banks.

The higher the percentage of assets a bank holds as loans, the higher the capital requirement.

Answer 1

Amswern uSe the infermelen prasented in miduestan Bank's balants &teaf Suppose tle owners oftlhe bomk borrow 100 to Supple mewt theix exifing eseruy. Thi's woulo incease thue Ye serues acco umts adneYeaje intte debt accounts. Leve rage rabios using fee br mula tthe leuemge o Calculatidl Total avet Leverarge E qufty Busing egualien the initiel redfo is IS00 Talio Le veYny Now Callutale new leverese reio atbr tlue ttue Ownn otlue bamk borrow 10o Yalfo leuaraye 100 160 Thus ittlhe owne bamk borrousloo, tes would also bring he leerage healforom ts intiel value to a new Value ofs 160-

nt rest isto protact Henceits Pnterded dupesitors