Explanation

The leverage ratio is calculated as:

Leverage Ratio = 1 / Margin Requirement

Given:

• Minimum margin requirement = 35% = 0.35

Calculation: Leverage Ratio = 1 / 0.35 = 2.857 ≈ 2.86

Why this is correct:

1. The margin requirement represents the percentage of the total investment that must be provided by the investor's own funds.
2. If the margin requirement is 35%, the investor can borrow 65% of the investment.
3. The leverage ratio shows how much total investment can be controlled per dollar of equity.
4. With 35% margin, for every $1 of equity, the investor can control approximately $2.86 of investment ($1/0.35).

Verification:

• If an investor has $35 of equity and borrows $65, total investment = $100
• Leverage ratio = Total investment / Equity = $100 / $35 = 2.857 ≈ 2.86

Therefore, option C (2.86) is the correct answer.