XYZ Bank is having ROA of 2.8%. It is proposing to increase its EM from 10...

XYZ Bank is having ROA of 2.8%. It is proposing to increase its EM from 10 to 20. Assuming no change in its ROA, will this proposal reduce its ROE? Select one:

a. Yes

b. No

Expert Solution

No, the proposal will not reduce ROE

ROE=ROA*EM

So, if ROA is unchanged, ROE will increase with increase in EM

jeff jeffy answered 2 years ago

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