National Bank has the following balance sheet (in millions) and has no off-balance-sheet activities:
Assets Liabilities
Cash $20 Deposits $980
Treasury bills 40 Subordinated debentures 40
Residential mortgages 600 Common stock 40
Business loans (BB rated) 430 Retained earnings 30
Total assets $1,090 Total liabilities and equity $1,090
a. What is the leverage ratio?
b. What is the CET 1 risk-based ratio?c. What is the Tier 1 risk-based capital ratio?d. What is the total risk-based capital ratio?
e. In what capital risk category would National Bank be placed?

Question

contestada

Respuesta :

cancinodavidq cancinodavidq · Answer 1 · 2019-12-13T23:38:41+01:00

Answer:

Answers below

Explanation:

a) What is the CET1 risk-based ratio?

Ans:- CET1 risk-based ratio = ($45 + $40)/$1,090 = 0.07798 or 7.798 percent.

b) What is the Tier 1 Risk-based capital ratio?

Ans:- Risk-adjusted assets = $20x0.0 + $40x0.0 + $600x0.5 + $430x1.0 = $730.

Tier I capital ratio = ($45 + $40)/$730 = 0.11644 or 11.644 percent.

c) What is the total risk-based capital ratio?

Ans:- The total risk-based capital ratio = ($25 + $45 + $40)/$730 = 0.150685 or 15.07 percent.

d) What is the leverage ratio?

Ans:- leverage ratio= ($45 + $40)/$1,090 = 0.07798 or 7.798 percent.

e) In what capital risk category would National Bank be placed?

Ans:- The bank would be place in the well-capitalized category.