Table 30-5

First National Bank

Assets Liabilities and Owners' Equity

Reserves $1,200 Deposits $9,000
Loans 8,000 Debt 800
Short-term securities 800 Capital (owners' equity) 200

Refer to Table 30-5. This bank's leverage ratio is

Question

Table 30-5

First National Bank

Assets                                                    Liabilities and Owners' Equity

Reserves	$1,200 	Deposits	$9,000 
Loans	8,000 	Debt	800 
Short-term securities	800 	Capital (owners' equity)	200 
​

Refer to Table 30-5. This bank's leverage ratio is

BlackTom AI · Accepted Answer

Leverage ratio is total assets divided by owners’ equity (capital). This ratio (also called the equity multiplier) measures how many dollars of assets are supported by each dollar of capital.

1. Relevant knowledge points and concepts
- Total assets = sum of all asset items on the balance sheet.
- Owners’ equity (capital) is the bank’s net worth.
- Leverage ratio = Total assets / Owners’ equity.

2. Step-by-step reasoning and calculations
- List the asset amounts from the table:
  - Reserves = $1,200
  - Loans = $8,000
  - Short-term securities = $800
- Compute total assets:
  - Total assets = 1,200 + 8,000 + 800 = $10,000
- Owners’ equity (capital) from the liabilities and owners’ equity side = $200
- Compute leverage ratio:
  - Leverage ratio = Total assets / Owners’ equity = 10,000 / 200

3. Intermediate arithmetic steps
- 10,000 ÷ 200 = (10,000/100) ÷ 2 = 100 ÷ 2 = 50

4. Why the correct answer is correct
- Using the standard definition (assets divided by owners’ equity) yields 50, meaning the bank holds $50 in assets for each $1 of capital. This is the conventional measure of bank leverage and matches the calculation above.

5. Why the other options are incorrect
- Option "2." would require owners’ equity of $5,000 (10,000/2), which contradicts the stated capital of $200.
- Option "7.5." would require owners’ equity of $1,333.33 (10,000/7.5), not $200.
- Option "13.3." would require owners’ equity of about $751.88 (10,000/13.3), not $200.
- None of those options match the correct assets-to-equity computation; they therefore misapply the definition.

Conclusion
The correct leverage ratio is 50, which matches the provided answer of "50."

Table 30-5 First National Bank Assets Liabilities and Owners' Equity Reserves $1,200 Deposits $9,000 Loans 8,000 Debt 800 Short-term securities 800 Capital (owners' equity) 200 Refer to Table 30-5. This bank's leverage ratio isSingle choice

Similar Questions

If you (the analyst) were to adjust for the Australian housing loans to fully impair the “Items 90 days past due, or otherwise in default and not impaired” the leverage ratio (metric) as used by Hoenig (above) applied to Westpac’s balance sheet as at 30 September 2018 would:

You own a bond that pays $64 in interest annually. The face value is $1,000 and the current market price is $1,021.61. The bond matures in 11 years. What is the yield to maturity?

Which of the following statements is CORRECT?

It will cost $9,600 to acquire an ice cream cart that is expected to produce cash inflows of $3,600 a year for three years. After the three years, the cart is expected to be worthless. What is the payback period?

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler

Table 30-5 First National Bank Assets Liabilities and Owners' Equity Reserves $1,200 Deposits $9,000 Loans 8,000 Debt 800 Short-term securities 800 Capital (owners' equity) 200 ​ Refer to Table 30-5. This bank's leverage ratio isSingle choice