alleryStart learning →A bank must hold 5% capital against assets. Its maximum accounting leverage is?
A20 to 1
B25 to 1
C12.5 to 1
D5 to 1
Answer & Solution
Correct answer: A. 20 to 1
Accounting leverage cap is the reciprocal of the capital ratio, and 1 divided by 0.05 is 20 to 1.
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