A bank has a return on assets of 2 percent, $40 million in assets, and $4 million in equity. What is the return on equity?
A)10 percent
B).2 percent
C)2 percent
D)20 percent
E)None of these are correct.

Question

Quizplus · Accepted Answer

Return on Equity (ROE) is calculated as (Net Income / Equity). With a return on assets of 2%, the net income is 2% of $40 million, which is $0.8 million. ROE is then ($0.8 million / $4 million) * 100% = 20%.

A Bank Has a Return on Assets of 2 Percent