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Let's assume that you have been asked to find out 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. find out the equity capital ratio.

b. find out the Tier 1 Ratio using risk-adjusted assets.

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

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M944014

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