10. Lets assume that you have been asked to calculate risk-based
capital ratios for a bank with the following accounts:
Cash $5 million
Government securities $7 million
Mortgage loans $30 million
Other loans $50 million
Fixed assets $10 million
Intangible assets $4 million
Loan-loss reserves $5 million
Owners equity $5 million
Trust-preferred securities $3 million
Cash assets and government securities are not considered risky.
Loans secured by real estate have a 50 percent weighting factor.
All other loans have a 100 percent weighting factor in terms of
riskiness.
a. Calculate the equity capital ratio.
b. Calculate the Tier 1 Ratio using risk-adjusted assets.
c. Calculate the Total Capital (Tier 1 plus Tier 2) Ratio using
risk-adjusted assets.