Imagine a bank with the assets below (with respective risk weights) and subject to both a...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Imagine a bank with the assets below (with respective risk weights) and subject to both a traditional capital requirement and a leverage ratio requirement. Banking regulation requires the bank's capital ratio to be at least 9% and its debt-to-asset ratio to be equal or lower than 95% (leverage ratio requirement). List of Assets in the Bank's Balance Sheet Cash and Reserves, Value = $240M, Risk Weight = 0%. Mortgage Loans 1, Value = $660M, Risk Weight = 20%. Mortgage Loans 2, Value = $750M, Risk Weight = 60%. C&I Loans, Value = $900M, Risk Weight = 100%. Consumer Loans, Value = $450M, Risk Weight = 100%. Calculate the minimum amount of equity capital (in dollars) that the bank needs to have to satisfy both of these capital requirements. Imagine a bank with the assets below (with respective risk weights) and subject to both a traditional capital requirement and a leverage ratio requirement. Banking regulation requires the bank's capital ratio to be at least 9% and its debt-to-asset ratio to be equal or lower than 95% (leverage ratio requirement). List of Assets in the Bank's Balance Sheet Cash and Reserves, Value = $240M, Risk Weight = 0%. Mortgage Loans 1, Value = $660M, Risk Weight = 20%. Mortgage Loans 2, Value = $750M, Risk Weight = 60%. C&I Loans, Value = $900M, Risk Weight = 100%. Consumer Loans, Value = $450M, Risk Weight = 100%. Calculate the minimum amount of equity capital (in dollars) that the bank needs to have to satisfy both of these capital requirements.
Expert Answer:
Answer rating: 100% (QA)
To calculate the minimum amount of equity capital that the bank needs to satisfy both the traditiona... View the full answer
Posted Date:
Students also viewed these finance questions
-
Problem 16-21 Taxes and the Cost of Capital (LO2) Here are book- and market-value balance sheets of the United Frypan Company (figures in $ millions): Book-Value Balance Sheet Net working capital...
-
Question: Old MathJax webview Old MathJax webview i need ans of these question but the source is alot Old MathJax webviewOld MathJax webview i need ans of these question but the source is alot these...
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5. Ivan's grandfather died and left a portfolio of municipal bonds. In 2012, they pay Ivan...
-
Refer to Exercise. a. Are the required conditions satisfied? b. Is multicollinearity a problem? If so, explain the consequences.
-
The legal concept of stare decisis, which means to stand on decided cases, is an important factor in our system of law. Is it possible that previous cases, or precedents, do not always embody the...
-
In March, the two production departments had budgeted allocation bases of 4,000 machine-hours in Department 100 and 8,000 direct manufacturing labor-hours in Department 200. The budgeted...
-
for determining whether operations have been discontinued and the problems that might arise in applying them. 5 Annual accounts have been put into such a straitjacket overemphasis on uniform...
-
Friedman Construction reported taxable income of $50,000 for 2011, its first fiscal year. The enacted tax rate for 2011 is 40%. Enacted tax rates and deductible amounts for 20122014 are as follows:...
-
Mino Inc. manufactures chocolate syrup in three departments: Cooking, Mixing, and Bottling. Mino uses the weighted average method. The following are cost and production data for the cooking...
-
Profitability Ratios The following selected data were taken from the financial statements of Vidahill Inc. for December 31, 2017, 20Y6, and 2015: December 31 20Y7 20Y6 20Y5 Total assets $280,000...
-
Discuss overall information flow and the major role of each APS system component.
-
What is the logic of designing echeloned logistical structures? Can echeloned and direct structures be combined?
-
Many investors rely on highlights from the annual report as provided by online and CD-ROM-based information services and do not read the reports themselves. These services do not contain the text of...
-
Discuss the major supply chain APS applications with particular focus on the role and anticipated benefits for each application.
-
How could the relationship between the auditor and management change if conclusive proof emerged that a qualified audit report had adverse implications?
-
Assignment 3 10. Costs are rising for all kinds of medical care. The mean monthly rent at assisted-living facilities was reported to have increased 17% over the last five years to $3486 (The Wall...
-
Let (x) = x 2 - 9, g(x) = 2x, and h(x) = x - 3. Find each of the following. (((--) 2
-
What is synergy?
-
Your new insight into investment policy, especially the link between P/E and PBR, and the rate of return on the investment.
-
Show how the share price of a very profitable company which invests at a rate of return that is higher than the required rate of return can still drop.
Study smarter with the SolutionInn App