Lets assume that you have been asked to calculate risk-based capital ratios for a bank with the

Question:

Let’s assume that you have been asked to calculate risk-based capital ratios for a bank with the following accounts:

Cash = $5 million

Government securities = $7 million

Mortgage loans = $30 million

Other loans = $50 million

Fixed assets = $10 million

Intangible assets = $4 million

Loan-loss reserves = $5 million

Owners’ equity =$5 million

Trust-preferred securities = $3 million

Cash assets and government securities are not considered risky. Loans secured by real estate have a 50 percent weighting factor. All other loans have a 100 percent weighting factor in terms of riskiness.

a. Calculate the equity capital ratio.

b. Calculate the Tier 1 Ratio using risk-adjusted assets

c. Calculate the Total Capital (Tier 1 plus Tier 2) Ratio using risk-adjusted assets.

Intangible Assets
An intangible asset is a resource controlled by an entity without physical substance. Unlike other assets, an intangible asset has no physical existence and you cannot touch it.Types of Intangible Assets and ExamplesSome examples are patented...