Assets: Reserves 500, Loans 1000, Securities 500
Liabilites and Owners Equity: Deposits 1400, Debt 400
i.) Calculate (a) bank capital, (b) the leverage ratio, and (c) the percentage of assets financed by bank capital.
ii. ) By how much do assets need to depreciate for the bank’s capital to be wiped out?
A) Bank capital is defined as the value Or amounts invested by its investor or owners.
Bank capital = sum of Bank 's assets- sum of Bank's liabilities
Bank capital= (500+500+1400) -(400+1000)
=2400-1400
= 1000
B) :-Leverage is defined as Use of borrowed fund to supplement existing fundfund for purpose of further investment.
Most common leverage ratio is debt ratio and debt- to- equity ratio debt ratio= total debt/ total assets
Debt = 1400/2400
= 0.58 or 58 %
C):-To know the percentage of asset financed by bank is :
= total debt/ total assest
1400/2400
=0.58 Or 58%
That means 58% assets are financed bt Bank. Remaining 42 % is debt.
Sorry for second one question
Assets: Reserves 500, Loans 1000, Securities 500 Liabilites and Owners Equity: Deposits 1400, Debt 400 i.)...
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