Suppose an investment bank buys $100 million worth of mortgage-backed securities. It finances the purchase by borrowing $90 million and using $10 million from its equity
If the value of holdings of mortgage-backed securities declines by 5%, what is its return on equity investment?
Its leverage ratio is $100 million/$10 million = 10. The return on equity investment is -$5 million/$10 million = -50%.
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A nation has a population of 260 million people. Of these, 60 million are retired, in the military, institutionalized, or under 16 years old. There are 188 million who are employed and 12 million who are unemployed. What is the unemployment rate?
A. 27% B. 6% C. 9% D. 4%
Fogel (1964) came up with two estimates of social savings (? and ?). What do they represent?
(a) The level of industrial productivity using railroads and the level not using railroads (b) The lowered benefit of transport for agricultural goods using railroads and the lowered benefit of transport for all goods and passengers using railroads (c) The lower output of the U.S. economy using transportation financed through domestic capital and foreign capital (d) The cost of shipping goods by railroads and the cost of shipping by waterways and wagon transport
If the United States and Mexico trade Budweiser for Modelo beer, what type of trade does this represent?
What will be an ideal response?
A true and unambiguous burden on future generations will be created whenever government deficit spending
A) increases the ratio of government expenditure to GDP. B) pays for goods that yield no future benefits. C) is used as part of a countercyclical fiscal expansion. D) pays for capital expenditures.