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Let’s assume that you have been asked to calculate risk-based capital ratios for a bank with the following accounts.

Cash 7 million

Government Securities: 9 million

Mortgage loans 25 million

Other loans 55 million

Fixed assets 8 million

Intangible assets 5 million

Loan-loss reserves 4 million

Owners’ equity 6 million

Trust-preferred securities 3 million

Cash assets and government securities are not considered risky.

Loans secured by real estate have a 50% weighting factor.

All other loans have a 100 % weighting factor in term of riskiness.

Calculate the equity capital ratio.

Calculate the Tier 1 Ratio using risk-adjusted assets.

Calculate the Total Capital (Tier 1 and Tier 2) Ratio using risk-based assets.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91419433

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