$\begin{array}{lccc}
\text {Cash and Treasury securities}& \text { \$ 100 million}\
\text { FedFunds Sold }& \text { \$ 100 million}\
\text { Resiclential Mortgages 1-4 family}& \text { \$ 200 million}\
\text {Commercial Loans }& \text { \$ 600 million}\
\end{array}$
Note: The residential mortgages all have a loan-to-value of between 60 and 80 percent.
What is the ratio of capital to risk-adjusted assets,if the bank has capital of $50 million?

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 ratio of capital to risk-adjusted assets,if the bank has capital of $50 million?

Quizplus · Accepted Answer

The risk-adjusted assets are calculated by applying risk weights: 0% for Cash and Treasury securities, 20% for FedFunds Sold, 50% for Residential Mortgages, and 100% for Commercial Loans. The total risk-adjusted assets are $0 + $20M + $100M + $600M = $720M. The capital ratio is $50M / $720M = 6.94%. Capital to risk-adjusted assets: $50/$720 = 0.0694.

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