Question

1. Suppose assets are 1000 and liabilities are 900. The expected rate of return on assets...

1.

Suppose assets are 1000 and liabilities are 900. The expected rate of return on assets is 5% and the rate of interest on liabilities is 3%. What is the expected rate of return on equity?

Group of answer choices

a)2%

b)4%

c)16%

d)23%

2.

Suppose the expected rate of return on assets is 7% and the interest rate on liabilities is 4%. How large does leverage have to be to give you an expected return on equity of 16%?

Group of answer choices

a)2

B)4

C)6

D)8

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