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First Bank operates with an equity to assets ratio of 10 percent and has a ROA of 1 percent. What is its ROE? What would

First Bank operates with an equity to assets ratio of 10 percent and has a ROA of 1 percent. What is its ROE? What would its ROE be if it were allowed to operate with a 2 percent equity to assets ratio and profits remained the same? What does this suggest about the effects of financial leverage? Show your calculations.

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