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Leverage ratio from initial value

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Reference no: EM131100056

Use the information presented in Northeastern Mutual Bank's balance sheet to answer the following questions.

Bank's Balance Sheet

Assets

Liabilities and Owners' Equity

Reserves

$175

Deposits

$575

Loans

$700

Debt

$225

Securities

$875

Capital (owners' equity)

$950

Suppose the owners of the bank borrow $100 to supplement their existing reserves. This would increase the reserves account and increase the loans account.

This would also bring the leverage ratio from its initial value of 1.95to a new value of 3.94.

Reference no: EM131100056

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