Answer:
For finance, leverage means banks can use reserves to purchase assets, thus increasing future returns on investment.
Consider a bank with $8 million in deposits, and $1 million in reserves. Suppose it lent out $7,2 million,
Net assets of the bank = $8 million + $1 million = $9 million,
and shareholder equity $8 million.
return = 256000/200000 = 128%
loss in equity = -520000/200000 = -260%
Answer:
Explanation:
To determine the deposit left after expenses $8,000,000 -$7,200,000 = $800,000
Banks total asset = $1,000,000 + $800,000 = $1,800,000
Banks stockholders equity = asset - liabilities
Since the bank has no liability, then stockholders equity = $1,800,000
