Question

Suppose that as the manager of the first national​ bank, you have to make decisions about the appropriate amount of bank capital. looking at the balance sheet of the​ bank, which like the high capital bank has a ratio of bank capital to assets of​ 10% ($10 million of capital and​ $100 million of​ assets), you are concerned that the large amount of bank capital is causing the return on equity to be too low. you conclude that the bank has a capital surplus and should increase the equity multiplier to increase the return on equity. what should you​ do?

Answer 1

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