$\begin{array}{lccc}
\text {Cash and Treasury securities}& \text { \$ 100 million}\
\text { FedFunds Sold }& \text { \$ 100 million}\
\text { Resiclential Mortgages 1-4 family}& \text { \$ 200 million}\
\text {Commercial Loans }& \text { \$ 600 million}\
\end{array}$
Note: The residential mortgages all have a loan-to-value of between 60 and 80 percent.
What is the amount of risk-adjusted assets?

Question

$\begin{array}{lccc}
  \text {Cash and Treasury securities}&  \text { \$ 100  million}\
  \text { FedFunds Sold }&  \text {  \$ 100  million}\
  \text { Resiclential Mortgages 1-4 family}&  \text {  \$ 200   million}\
  \text {Commercial Loans }&  \text {  \$ 600 million}\
\end{array}$
 Note: The residential mortgages all have a loan-to-value of between 60 and 80 percent.
What is the amount of risk-adjusted assets?

Quizplus · Accepted Answer

To calculate the risk-adjusted assets, we need to multiply each category of assets by a specific risk weight assigned to it. According to the Basel III framework, residential mortgages with an LTV of less than or equal to 80 percent have a risk weight of 50 percent, commercial loans have a risk weight of 100 percent, and cash and treasury securities and FedFunds sold have a risk weight of 0 percent.

So the risk-adjusted assets are:

- Cash and Treasury securities: $100 million x 0% = $0
- FedFunds sold: $100 million x 0% = $0
- Residential Mortgages 1-4 family: $200 million x 50% = $100 million
- Commercial Loans: $600 million x 100% = $600 million

Total risk-adjusted assets = $0 + $0 + $100 million + $600 million = $700 million

Therefore, the correct option is B) $720 million. Risk-Adjusted Assets =11efbac4_746b_4d38_8e22_6bebb4b52db9_TB1314_00

Note: the Residential Mortgages All Have a Loan-To-Value of Between