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Anarel [89]
3 years ago
7

A bank has $100 million in assets in the 0 percent risk weight category, $200 million in assets in the 20 percent risk weight ca

tegory, $500 million in assets in the 50 percent risk weight category and $750 million in assets in the 100 percent risk weight category. This bank has $57 million in core (Tier 1) capital. What is this bank's ratio of Tier 1 capital to risk-weighted assets
Business
1 answer:
andre [41]3 years ago
5 0

Answer:

5.48% is the bank’s ratio of Tier 1 capital to risk-weighted assets

Explanation:

In this question, we are asked to calculate the bank’s ratio of Tier 1 capital to risk-weighted assets.

Firstly, we calculate the risk weighted asset for the bank

The risk weighted assets = The sum of the all the individual assets multiplied by the their percentage risk category

RWA = (100 * 0) + (200 * 0.2) + (500 * 0.5) + (750 * 1) = 0 + 40 + 250 + 750 = 1040

Now, the tier 1 capital to risk weighted ratio = 57/1040 = 0.0548 = 5.48%

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