Answered You can hire a professional tutor to get the answer.
Let's assume that you have been asked to calculate risk-based capital ratios for a bank with the following accounts:
3.10. Let’s assume that you have been asked to calculate risk-based capital ratios for a bank with the following accounts:Cash _ $5 millionGovernment securities _ $7 millionMortgage loans _ $30 millionOther loans _ $50 millionFixed assets _ $10 millionIntangible assets _ $4 millionLoan-loss reserves _ $5 millionOwners’ equity _ $5 millionTrust-preferred securities _ $3 millionCash 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. Calculate the equity capital ratio.b. Calculate the Tier 1 Ratio using risk-adjusted assets.c. Calculate the Total Capital (Tier 1 plus Tier 2) Ratio using risk-adjusted assets.
SOLUTION:Equity Capital Ratio = Equity Capital / Total AssetsEquity capital Ratio = ($5) / ($5 + $7 + $30 + $50 + $10 + $4)Equity Capital Ratio 4.72% Tier 1 Ratio = Tier 1 Capital / Risk...