1. As a guideline for bank regulators, the Basel I Accord provisions include which of the following requirements?

To require rating agencies to assess the risk of bank assets.

Banks with greater risk are required to maintain more capital.

To require banks to lower their capital requirements during a credit crisis so they can generate higher earnings to make up for anticipated losses.

Banks with greater risk are required to maintain more deposits.

2. Assume you borrow $5,000. You agree to fully repay the loan with a 5 year, annual ordinary annuity at 9%. (You will make 1 payment each year for 5 years, with the first payment due 1 year from today.) The loan will be fully repaid at the end of 5 years. {Note: even though the question specifies a 5 year annuity, you do not need to construct the entire amortization schedule to answer the following question.} How much of the second payment will go to repayment of principle (actually repaying the loan)? Choose the best answer.

$795

$806

$819

$828

$910