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luda_lava [24]
3 years ago
9

Calculate the risk-adjusted asset base for a bank with: a. Cash of $20 million, 0% b. Gen. Obligation municipal security of $100

million, 20% c. Singe family home mortgages of $500 million, 50% d. Commercial loans of $300 million, 100%. 4a. If the bank has no off-balance sheet activity what is the bank=s minimum required level of Tier1 and Tier 2 capital? 4b. If the bank has Tier 1 capital of $25 million and Tier 2 capital of $15 million does the bank comply with its capital requirement. 4c. Also, explain how the addition of off-balance sheet activities might impact the capital requirement of the bank
Business
1 answer:
Ulleksa [173]3 years ago
4 0
This is what i found  Answer 1
Risk-Adjusted Asset Base
The calculation of the risk-adjusted asset base for a bank is as below-
Risk-adjusted asset = (Cash × 0%) + (municipal security × 20%) + (home mortgages × 50%) + (Commercial loans × 100%)
= (20 × 0%) + (100 × 20%) + (500 × 50%) + (300$ × 100%)
= 0 + 20 + 250 + 300
= $570 million
The outcome shows that the risk-adjusted or weighted asset based for the bank will be $570 million.
Tier1 and Tier 2 Capital:
If the bank has no off-balance sheet activity then minimum required level of Tier 1 and Tier 2 capital will be-
Tier 1 capital = Risk-weighted asset × 4%
= $570 × 4%
= $22.8 million
Tier 2 capital = Maximum of 1.25% of risk-weighted asset
= $570 × 1.25%
= $7.125 million
Total capital = $22.8 + $7.125 => $29.925 million
The outcomes indicate that the minimum required level of Tier1 and Tier 2 capital is $22.8 million and $7.125 million for the bank.
Bank Comply with Capital Requirements:
If the bank has Tier 1 capital of $25 million and Tier 2 capital of $15 million then it will comply with its capital requirements of $29.925 million. It is because in this situation, total capital of bank is $37 million that is higher than the above calculated capital of $29.925 million.
Impact of off-Balance Sheet Activities on Capital Requirements
The addition of off-balance sheet activities might increase the capital requirement of the bank. It is because an off-balance sheet items is a financial contract that can create credit loss for the company due to credit risk. So, in case of adding off-balance sheet activities, a bank will require more capital to cover credit loss. Along with this, it can also increase the minimum ratio of capital to risk-weighted assets from 8% and in that situation; the bank will need more capital (Carmichael & Graham, 2012).
Answer 2
Probability of Repayment and Risk Premium
A).
If the rate on a one-year treasury bill is 6% and in case of loan default, no payments are expected on financial securities then the probability of repayment and the risk premium on 1 year AA-rated loan yielding 9 percent will be-
Probability of Repayment:
The following formula can be useful to determine probability of repayment.
P = (1 + I) / (1 + k)
Where,
I = 6%
k = 9%
Then, ...you have $2.19 left :D
 
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LCD Industries purchased a supply of electronic components from Entel Corporation on November 1, 2021. In payment for the $24 mi
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Based on the details given by LCD Industries such as the amount of the note and the interest rate, the journal entries are:

Date               Account title                         Debit                       Credit

Nov. 1 2021    Inventory                       $24,000,000

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Nov. 30, 2021 Interest expense                $240,000

                       Note payable                      $1,892,366.66

                       Cash                                                              $2,132,366.66

Amount of interest to be reported in income statement = $481,076.33.

<h3>What are the journal entries?</h3>

Inventory will be debited with the payment amount of $24 million. This amount will also be credited to the Note payable account.

The interest expense will be:

= 24,000,000 x 12% x 1/12 months

= $240,000

Cash payment:

= Amount / Present value interest factor of annuity, 1 year, 12%

= 24,000,000 /  11.2551

= $2,132,366.66

<h3>What is the amount of interest to be reported in the income statement?</h3>

= Interest expense in November + (Note amount - note payable for November ) x 1%

= 260,000 + (24,000,000 - 1,892,366.66) x 1%

= $481,076.33

Find out more on notes payable at brainly.com/question/25148915.

5 0
2 years ago
Presented below are transactions related to Novak Corp.
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Answer:

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2) December 8, 202x, sales allowance granted to Sarasota Corp.

Dr Sales returns and allowances 27,400

    Cr Accounts receivable 27,400

Sales returns and allowances is a contra revenue account that decreases sales revenue.

3) December 13, 202x, invoice collected from Sarasota Corp.

Dr Cash 592,608

Dr Sales discounts 24,692

    Cr Accounts receivable 617,300

Sales discounts is another contra revenue account that decreases sales revenue.

6 0
3 years ago
According to the table, if the interest rate on this account were 10 percent, how much money would you have in the account at th
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3 0
2 years ago
You are the primary system administrator for a large Active Directory domain. Recently, you have hired another system administra
KengaRu [80]

Answer:

D) Use the Delegation of Control Wizard to assign the necessary permissions on the OU that the new employee is to administer.

Explanation:

As for the information provided, we know that when some work is to be delegated then, care has to be taken, that the work when delegated, will require delegation of responsibilities and the right to have access to some authorities to do such work.

Here the new administrator needs to have the authority to access the specific OU.  And now, the administrator needs to delegate such rights for new password. Also, the administrator shall not access to passwords of other OU.

Accordingly for this, the company shall delegate with control wizard.

5 0
3 years ago
Last year, Forest Products issued both 5-year and 10-year bonds at par. The bonds each have a coupon rate of 5.5 percent, paid s
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Answer:

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PV of face value = $1,000 / (1 + 3.7%)⁸ = $747.77

PV of coupon payments = $27.50 x 6.81694 (PV annuity factor, 3.7%, 8 periods) = $187.47

Market price = $935.24

this bond's price decreased by 64.76/1,000 = 0.06476 = 6.48%

Price of the 10 year bond after the market rate increased to 7.4% is:

PV of face value = $1,000 / (1 + 3.7%)¹⁸ = $519.97

PV of coupon payments = $27.50 x 12.97365 (PV annuity factor, 3.7%, 18 periods) = $356.78

Market price = $876.75

this bond's price decreased by 123.25/1,000 = 0.12325 = 12.33%

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