(Answered) Bank l operates with equity to asset ratio of 6 percent

Finance

Bank L operates with equity to asset ratio of 6 percent, while Bank S operates with a similar ratio of 10 percent. Calculate the equity multiplier for each bank and the corresponding return on equity if each bank earns 1.5 percent on assets. Suppose, instead, that both banks report an ROA of 1.2 percent. What does this suggest about financial leverage?

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