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poizon [28]
3 years ago
5

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-we

ight 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?
Business
1 answer:
oee [108]3 years ago
8 0

Answer:

The bank's ratio of total capital to risk assets is 9.11%.

Explanation:

The capital adequacy ratio is calculated by dividing a bank's capital by its risk-weighted assets. The capital used to calculate the capital adequacy ratio is divided into two tiers.

CAR= \frac{Tier 1 Capital+Tier 2 Capital}{Risk Weighted Assets}

= \frac{96+48}{200(0) + 400(0.20) + 1000(0.50) + 1000}

=\frac{144}{1580}

= 0.0911 * 100

=9.11%.

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