A bank has risk-weighted assets of $170 and equity of $12. If regulators require a minimum risk-weighted capital ratio of 6 percent given the current level of equity, how many new assets with a 100 percent risk weight can the bank add?
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- 15. If a bank’s return on assets (ROA) is 1%, and its asset-to-equity ratio (equity multiplier) is 10, then the bank’s return on equity (ROE) is Question 15 options: a) 100%. b) 5%. c) 1%. d) 10%.Do not copy from another source. A. TMK Bank has the following balance sheet (in millions of dollars) with the risk weights in parentheses. Assets Liabilities and Equity Cash (0%) $40 Deposits $350 Interbank deposits with AA rated banks (20%) $55 Subordinated debt (5 years) $20 Standard residential mortgages (50%) $100 Non-cumulative preference shares $15 Business loans to BB rated borrowers (100%) $210 Common equity $20 Total assets $405 Total liabilities and equity $405 In addition, TMK Bank has $40 million in performance-related standby letters of credit (SLCs) with credit conversion factor of 50%. Consider capital conservation buffer and assume that APRA suggests 1% countercyclical capital buffer due to COVID related effects. i. What is the total minimum capital required under Basel III? ii. Calculate Tier 1 CAR, Common Equity Tier 1 CAR, and Total CAR and compare them with Basel III requirements. iii. Does TMK Bank have enough capital to meet the…First National BankAssets LiabilitiesRate-sensitive R40 million R50 millionFixed-rate R60 million R50 millionIf interest rates rise by 5 percentage points, say from 10 to 15%, bank profits (measuredusing gap analysis) will
- Assuming that the average duration of First National Bank's $100 million assets is five years, while the average duration of its $80 million liabilities is three years, then a 5 percentage point increase in interest rates will cause the net worth of First National to _decrease_______ by $___13_____ million dollars. I got decreased by 13 million I took assets 25%(5%x5yrs) then liabilities 15%(5%x3) then 25 million off assests and 12 million liabilities 25-12=13 million increase; 15 decline; 5 increase; 25 decrease; 13The demand curve and supply curve for one-year discountbonds with a face value of $1,000 are represented by thefollowing equations:Bd: Price = -0.8 * Quantity + 1100Bs: Price = Quantity + 680a. What is the expected equilibrium price and quantityof bonds in this market?b. Given your answer to part (a), what is the expectedinterest rate in this marketThe following is the balance sheet numbers (in millions) reported by Bay Bank for 2020. The sovereign and corporate ratings are provided in parentheses. Based on Basel II standards, are the banks adequately capitalized (use Table 9.8 for risk weights). US Treasury Bonds (AAA) $50 Chinese Sovereign Bonds (A+) $50 Deposits $383 Mortgages $100 Corporate Loans (BBB+) $85 Bonds (Tier 2 Capital) 15 Corporate Loans (BB+) $125 Equity (Tier 1 Capital) 12 $410 $410 a Yes, they have sufficient Tier 1 and Tier 1+2 capital b No, they do not have sufficient Tier 1 or Tier 1+2 capital c No, they have sufficient Tier 1 but insufficient Tier 1+2 capital d No, they do have sufficient Tier 1+2 capital but insufficient Tier…
- Assume that you manage a risky portfolio with an expected return of18% and a standard deviation of 28%. The T-note rate is 2.7%. If your client chooses to invest 75% of a portfolio in your fund and 25% in a T-note bond fund. a. What is the expected return of your client's portfolio? b. What is the standard deviation of your client's prtfolio?1.A bank enters into an interest rate swap with a nonfinancial counterparty using bilateral clearing where it is paying a fixed rate of 4% and receiving LIBOR. No collateral is posted and no other transactions are outstanding between the bank and the counterparty. Which statement is TRUE? Select one: a. None of the choices b. The credit risk to the bank is lesser when the yield curve is downward sloping. c. The credit risk to the bank is greater when the yield curve is upward sloping. d. The credit risk to the bank is independent of the shape of the yield curve.Nielson Motors (NM) has no debt. Its assets will be worth $600 million in one year if the economy is strong, but only $300 million if the economy is weak. Both events are equally likely. The market value today of Nielsonʹs assets is $400 million. The expected return for Nielson Motors stock without leverage is closest to: A. ‐25.0% B. ‐17.5% C. ‐12.5% D. 12.5%
- What do you understand by the term "Risk Free Interest Rate"? How do you rationalize this concept with phenomena characterized by the Government of Barbados’ debt restructuring in 2019?Which of the following is NOT TRUE about security/bond valuation? *a. The valuation concept is only applicable to the most common financial securities, the stocks and bonds.b. There are different methods of analysis in valuing bonds which includes getting it present values of future cash flowsc. Regardless of their differences in attributes, other financial securities have essentially the same valuation concept.d. None of the choices.which of the following would you expect to happen in US treasury if rating agencies downgraded US government debt due to covid 19? 1. US treasury yields would go down 2. US treasury yields would go up 3. Face-values oof US treasuries would go down 4. Face-values of US treasury would go up a. 1 only b. 2 and 4 only c. 2 only d. 1 and 4 only e, 1 and 3