A bank has $200 million in assets in the 0 percent risk-weight category.It has $400 million in assets in the 20 percent risk-weight category.It has $1,000 million in assets in the 50 percent risk-weight category and has $1,000 million in assets in the 100 percent risk-weight category.This bank has $96 million in Tier 1 capital and $48 million in Tier 2 capital.What is this bank's ratio of total capital to risk assets?

Question

Quizplus · Accepted Answer

The total risk-weighted assets of the bank can be calculated as follows:

Total risk-weighted assets = (0% risk-weighted assets) + (20% risk-weighted assets * 0.20) + (50% risk-weighted assets * 0.50) + (100% risk-weighted assets)

Total risk-weighted assets = $200 million + $80 million + $500 million + $1000 million

Total risk-weighted assets = $1780 million

The total capital of the bank is the sum of Tier 1 and Tier 2 capital:

Total capital = Tier 1 capital + Tier 2 capital

Total capital = $96 million + $48 million

Total capital = $144 million

Finally, we can calculate the ratio of total capital to risk-weighted assets:

Ratio of total capital to risk-weighted assets = (Total capital / Total risk-weighted assets) * 100%

Ratio of total capital to risk-weighted assets = ($144 million / $1780 million) * 100%

Ratio of total capital to risk-weighted assets = 8.09%

Therefore, the best choice is C) 9.11 percent, which is the closest option to the calculated ratio of 8.09%.

A Bank Has $200 Million in Assets in the 0