/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q. 23 Axle Bank reported an ROE of 16%... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 9: Q. 23 (page 264)

Axle Bank reported an ROE of 16% and an ROA of 1.32%. What is the equity multiplier? How well capitalized is this bank?

Short Answer

Expert verified

Equity Multiplier is12.12

Step by step solution

01

Concept Introduction

Return on equity (ROE) is the standard of a firm's net earnings divided by its shareholders' equity. ROE is a gauge of a company's profitability and how efficiently it develops those profits.

02

Explanation

ROE = ROA 脳EM

0.16=0.0132脳EM

EM = 12.12= asset/equity

03

Final answer

This is a well-capitalized bank because its equity asset ratio exceeds the minimum required level.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

After July 2010, bank customers using a debit card had to specifically opt-in to the bank鈥檚 overdraft protection plan. Explain the effect of this regulation on a bank鈥檚 noninterest income.

Suppose New Bank decides to invest \(273million in 30-day T-bills. The T-bills are currently trading at \)4,981 (including commissions) for a $4,940 face value instrument. How many T-bills do they purchase? What does the balance sheet look like?

鈥淏ecause diversification is a desirable strategy for avoiding risk, it never makes sense for a bank to specialize in making specific types of loans.鈥� Is this statement true, false, or uncertain? Explain your answer

If the bank you own has no excess reserves and a sound customer comes in asking for a loan, should you automatically turn the customer down, explaining that you don鈥檛 have any excess reserves to lend out? Why or why not? What options are available that will enable you to provide the funds your customer needs?

Why do equity holders care more about ROE than about ROA?

See all solutions

Recommended explanations on Economics Textbooks

Taxation Economics

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.