Consider the following balance sheet for a hypothetical bank. All values are in millions of Canadian dollars

Assets Liabilities Bonds 500 Deposits 480 Equity 2

Total 500 Total 500

a) Calculate the leverage ratio for the bank b) Calculate the capital ratio for the bank c) Suppose that an increase in the rate of interest decreased the value of assets by 3%. Show how the leverage ratio and capital ratio would changes as a result. Has the risk of insolvency decreased or increased?