A bank has total assets of $3,000,000. Of these assets, $200,000 are cash and $300,000 are Treasury securities. Furthermore, the bank holds municipal revenue bonds of $600,000, residential mortgages of $1,000,000, and consumer and commercial loans of $900,000. This bank's risk-adjusted assets are

Question

Quizplus · Accepted Answer

Risk-adjusted assets are calculated based on the risk-weighted value of a bank's assets. 
To determine the risk-weighted value, each type of asset is assigned a certain risk weight, ranging from 0% (for cash and Treasuries) to 100% (for consumer and commercial loans). 
The risk-weighted value is then calculated by multiplying the asset amount by its risk weight. 
In this case, the risk-weighted value would be: 
Cash: $200,000 x 0% = $0 
Treasury securities: $300,000 x 0% = $0 
Municipal revenue bonds: $600,000 x 20% = $120,000 
Residential mortgages: $1,000,000 x 35% = $350,000 
Consumer and commercial loans: $900,000 x 100% = $900,000 
The sum of these risk-weighted values is $1,370,000, which is the bank's risk-adjusted assets. 
Therefore, the correct answer is D) $1,070,000.

A Bank Has Total Assets of $3,000,000