Explanation

The leverage ratio is calculated as:

Leverage Ratio = 1 / Margin Requirement

Given:

• Minimum margin requirement = 55% = 0.55

Calculation: Leverage Ratio = 1 / 0.55 = 1.8181... ≈ 1.82

Why this is correct:

1. Margin requirement represents the percentage of the total position value that must be contributed by the investor's own funds.
2. Leverage ratio measures how much total exposure an investor gets relative to their own capital.
3. With a 55% margin requirement, for every $1 of investor capital, they can control approximately $1.82 in total position value.

Verification:

• If an investor has $100 of their own capital and margin requirement is 55%:
  • Total position value = $100 / 0.55 = $181.82
  • Leverage ratio = $181.82 / $100 = 1.8182 ≈ 1.82

Why other options are incorrect:

• A. 1.55: This would be the inverse of a 64.5% margin requirement (1/1.55 ≈ 0.645)
• C. 2.22: This would be the inverse of a 45% margin requirement (1/2.22 ≈ 0.45)

This question tests understanding of margin requirements and leverage calculations in finance.