Answer:
1. increase securities , increase owners equity
2. Leverage ratio is 5.2
3. A. The return on each asset
Explanation:
1. If the bank owner decide to imcrease assets by buying new securities through additional funds from them, then securities assets increases by $200 and owners equity increases by $ 200 to balance the balance sheet
2. Leverage ratio= total assets divided by owners equity
= 1950/375= 5.2 ( owners equity increases by $200 to make $375)
3. Banks consider return on assets to allocate asset resources because they weigh risk and return and allocate to resources on the basis of greatest optimal risk return combination
1. The investment of an additional $200 by the owners of the bank and the purchase of securities in the name of the bank would increase the securities account and increase the Capital account by $200, respectively.
2. This additional investment would also bring the leverage ratio from its initial value of 14.00 ($1,750/$125) to a new value of 6.00 ($1,950/$325).
The leverage ratio is computed as the ratio of the total assets to the equity capital.
Thus, the old leverage ratio is 14 ($1,750/$125) just as the new leverage ratio is 6 ($1,950/$325).
3. The factor that bankers take into account when determining how to allocate their assets is A. The return on each asset.
The return on assets is a financial measure indicating the profitability of an asset relative to other assets.
Bank's Balance Sheet
Assets Liabilities and Owners' Equity
Reserves $175 Deposits $1,400
Loans $700 Debt $225
Securities $875 Capital (owners' equity) $125
Total $1,750 Total $1,750
Bank's New Balance Sheet
Assets Liabilities and Owners' Equity
Reserves $175 Deposits $1,400
Loans $700 Debt $225
Securities $1,075 Capital (owners' equity) $325
Total $1,950 Total $1,950
Thus, the factor that bankers consider in determining the allocation of assets is Option A.
Learn more about the bank's leverage ratio at https://brainly.com/question/14002613
