Question

Suppose a new customer adds $100 to his account at Midwestern Mutual Bank, which the owners of the bank then use to make $100 worth of new loans. This would increase the loans account and the account.

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

Answer 1

i know it but i dont understand

Answer 2

Answer: 100:1

Explanation: the $100,000 worth of loan would increase the loan account by the same $100,000 and further reduce the cash account by $100,000. For lack of sufficient details, This would bring the leveraged ratio from an initial value of Nil to a new value of 100:1.