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A bank has a capital of $200 and a leverage ratio of 5. If the value of the bank's assets declines by 10 percent, then its capital will be reduced to a. $100. b.$150. c. $180. d. $185.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter21: The Monetary System

Section: Chapter Questions

Problem 4CQQ

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Question

A bank has a capital of $200 and a leverage ratio of 5. If the value of the bank's assets declines by 10 percent, then its capital will be reduced to

a. $100.

b.$150.

c. $180.

d. $185.

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