Use information in North Banks balance sheet to answer the questions below North

Question

Use information in North Banks balance sheet to answer the questions below North Banks balance sheet Assets ------------ Liabilities and Owners equity Reserves $ 125 -------------- Deposits $575 Loans $600 ------------ Debt $200 Securities $150 ------------ Capital (owners equity) $100 Suppose a new customer adds $100 to his account at North Bank, which the owner of the bank then use to make $100 of new loans. This would increase the loans account and __________________(decrease OR increase) the _____________________(reserves OR deposits OR Capital OR loans or Debt) account. This would also bring the leverage ratio from its initial value of ______________(8.75 OR 13.15 OR 10.85 OR 9.75) to a new value of _______________ (8.75 OR 13.15 OR 10.85 OR 9.75)

Explanation / Answer

$100 added to bank is the liability for the bank because it has to repay the money back to the customer. This will increase the debt of the bank. Leverage value was earlier Debt/Equity = 200+575/100 to 200+100+575/100 I hope this helps. Do rate me. Require ratings. :)

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