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The bank you own has the same balance sheet as given initially in number 7: Suppose that the return on assets (ROA) is 4%. Calculate

The bank you own has the same balance sheet as given initially in number 7:

Suppose that the return on assets (ROA) is 4%. Calculate the return on equity (ROE). Suppose your bank capital increases to $40 while deposits fall to $60.

Assuming the ROA is fixed, what happens to ROE?

Explain the benefits and costs of a bank increasing its capital.

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