Suppose an investment bank has a leverage ratio of 10 and the value of its securities decline by 10%. What happens to its return on equity investment?
A) declines by 1%
B) increases by 1%
C) declines by 100%
D) increases by 100%
C
You might also like to view...
A market is perfectly competitive even if firms have the ability to set their own price as long as the price difference reflects differences in the product
Indicate whether the statement is true or false
f Bob earns $20,000 per year and Sue earns $100,000 a year, and there is a flat tax of 10 percent imposed, then Bob would pay __________, Sue would pay ___________, and this is a __________ tax.
A. $2,000; $10,000; proportional B. $2,000; $10,000; progressive C. $2,000; $10,000; lump-sum tax D. $200; $1,000; flat tax
When an American doctor opens a practice in Bermuda, his production there is part of U.S. GDP
a. True b. False Indicate whether the statement is true or false
If the nominal interest rate is 4 percent and the expected inflation rate is 1 percent, the real interest rate is
A) 3 percent. B) 5 percent. C) 4 percent. D) 1.50 percent. E) 0.25 percent.