Onshore Bank has $39 million in assets, with risk-adjusted assets of $29 million. Core Equity Tier 1 (CETI) capital is $1,350,000, additional Tier I capital is $550,000, and Tier II capital is $438,000. The current value of the CET1 ratio is 4.66 percent, the Tier I ratio is 6.55 percent, and the total capital ratio is 8.06 percent.

Transcribed Image Text:

Calculate the new value of CETI, Tier I, and total capital ratios for the following transactions. a. The bank repurchases $119,000 of common stock with cash. b. The bank issues $3.9 million of CDs and uses the proceeds to issue category I mortgage loans with a loan-to-value ratio of 70 percent. c. The bank receives $519,000 in deposits and invests them in T-bills. d. The bank issues $819,000 in common stock and lends it to help finance a new shopping mall. The developer has an A+ credit rating. e. The bank issues $2.9 million in nonqualifying perpetual preferred stock and purchases general obligation municipal bonds. f. Homeowners pay back $5.9 million of mortgages with loan-to-value ratios of 50 percent and the bank uses the proceeds to build new ATMS. 3, Assume that a bank has assets located in Germany worth €300 million earning an average of 9 percent. It also holds €170 in liabilities and pays an average of 7 percent per year. The current spot rate is €1.50 for $1. If the exchange rate at the end of the year is €2.00 for SI: a. What happened to the dollar? Did it appreciate or depreciate against the curo (E)? b. What is the effect of the exchange rate change on the net interest margin (interest received minus interest paid) in dollars from its foreign assets and liabilities? c. What is the effect of the exchange rate change on the value of the assets and liabilities in dollars? Calculate the new value of CETI, Tier I, and total capital ratios for the following transactions. a. The bank repurchases $119,000 of common stock with cash. b. The bank issues $3.9 million of CDs and uses the proceeds to issue category I mortgage loans with a loan-to-value ratio of 70 percent. c. The bank receives $519,000 in deposits and invests them in T-bills. d. The bank issues $819,000 in common stock and lends it to help finance a new shopping mall. The developer has an A+ credit rating. e. The bank issues $2.9 million in nonqualifying perpetual preferred stock and purchases general obligation municipal bonds. f. Homeowners pay back $5.9 million of mortgages with loan-to-value ratios of 50 percent and the bank uses the proceeds to build new ATMS. 3, Assume that a bank has assets located in Germany worth €300 million earning an average of 9 percent. It also holds €170 in liabilities and pays an average of 7 percent per year. The current spot rate is €1.50 for $1. If the exchange rate at the end of the year is €2.00 for SI: a. What happened to the dollar? Did it appreciate or depreciate against the curo (E)? b. What is the effect of the exchange rate change on the net interest margin (interest received minus interest paid) in dollars from its foreign assets and liabilities? c. What is the effect of the exchange rate change on the value of the assets and liabilities in dollars?

Answer rating: 100% (QA)

Solution Core Equity Tier 1 CET 1 Capital 1350000 Additional Tire 1 Capital 550000 Tier II Capital 4... View the full answer