1) A loan portfolio contains both investment grade and sub-investment grade loans. The risk weight is 50% for the investment grade loan and 130% and the sub-investment grade. The regulatory capital requirement (capital/risk weighted assets) is 8%. What is the proportion of investment grade loan in the portfolio that makes the regulatory capital ratio equal 8%? Enter your answer as a percentage number but without the percentage sign "%" (Example, enter 10.50 for 10.50%; Do not enter "10.50%" or "0.1050") 

 

2) Refer to the information below:

Adjusted asset exposure (AE): $12,612

Expected default frequency (EDF): 1.00%

Standard deviation of EDF: 9.95%

Loss given default (LGD): 75%

Standard deviation of LGD: 25%

Correlation between EDF and LGD: 48%

What is the expected loss? Answer question in dollars and keep two decimals.

 

3) Which of the following is TRUE about project finance loans?

A)In general, project loans are backed up by corporate assets, as well as cash flows from the project.

B)Project finance involves a corporate borrower investing in a single industrial asset (usually with a limited life) collateralized by the parent corporation's future cash flows.

C)Project finance involves a debt to a legally-independent entity for investment in a single purpose asset whose future cash flows are the only source for repayment of the debt.

D)Lenders look to the entire assets of borrower's company to generate cash flow as the source of principal and interest payments.

Answer rating: 100% (QA)

Q1 Let amounts of investment grade and subinvestment grade be A and B respectively Amount of regu... View the full answer