What is the leverage implied by the bank balance sheet listed below?
?
Assets
?
?
Liabilities & Net Worth
?
Reserves
$280,000
?
Checking Deposits
$2,800,000
Loans Outstanding
$2,920,000
?
?
?
Total
$3,200,000
?
Net Worth
?
?
?
?
Stockholders’ Equity
$400,000
?
?
?
Total
$3,200,000
A. 2-to-1
B. 7-to-1
C. 8-to-1
D. 10-to-1
Answer: C
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