11. A bank has equity of $100. It borrows at 3% and lends at 5%.

A. Explain how leveraging affects the profitability and insolvency risk (you may want to compare leveraging ratios of 10 and 20 in your answer).

B. Explain how and why leveraging ratios evolved after the 1980s in the U.S. How is their evolution relevant to the 2008 financial crisis.