FIN 4243
–
Commercial Bank Management
Review Problems: Chapter 12 & Homework 4
Solutions
Use the following information to answer questions 1 - 6. 1.How much Tier 1 capital does the bank have?
2.What is the minimum leverage capital for this bank?
3.What is the amount of risk-adjusted assets for the bank?
ANSWER:
See table below:
Risk Weight
Risk-Adjusted Assets
Cash and Treasury Securities
2,000
$
0%
-
$
Repurchase Agreements
1,000
$
20%
200
$
Municipal Bonds
1,500
$
20%
300
$
Single Family Home Mortgages
2,700
$
50%
1,350
$
CMOs
2,500
$
50%
1,250
$
Commercial Loans
1,500
$
100%
1,500
$
Agricultural Loans
2,100
$
100%
2,100
$
Allowance for Loan Loss
(300)
$
0%
-
$
Bank Buildings
2,000
$
100%
2,000
$
Total
15,000
$
8,700
$
Bank Assets
4.What is the minimum Tier 1 capital this bank needs to have?
