8) Assume a bank's capital-to-asset ratio is 8% and assets are expected to grow 14% next year. What does the bank have...

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8) Assume a banks capital-to-asset ratio is 8% and assets are expected to grow 14% next year. What does the bank have to ear

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Answer 1

Answer #1

The correct option is A.) 1.12%

Capital/ Asset = 8/100

Growth rate of asset = 14%

Assets = 100+ 14%(100) = 114

New capital to asset ratio

Capital /Asset = x/114 = 8/100

Thus, x = 9.12

Increase in capital = 9.12-8 = 1.12

Return as a percentage of assets = 1.12/100 = 1.12%

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Answer 2

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