(SOLVED) UNSW bank has $20 million in assets, with risk-adjusted assets of $10 million. Tier 1 capital is $500,000 and Tier II capital is $400,000.
Discipline: Finance
Type of Paper: Question-Answer
Academic Level: Undergrad. (yrs 1-2)
Paper Format: APA
Pages: 1
Words: 60
Question
UNSW bank has $20 million in assets, with risk-adjusted assets of
$10 million. Tier 1 capital is $500,000 and Tier II capital is
$400,000.
If the bank issues $450,000 in common stock and uses it to issue mortgage loans (risk-weight 44%), what is the new total capital ratio?
a. 13.24%
b. 6.75%
c. 9.00%
d. 12.92% e. None of the options
Expert Solution Preview
Total capital ratio= Capital funds/Risk weighted assets
Given,
Current Risk weighted assets= $10 million
Amount on new loan= $450,000 and risk weight=44%
Therefore, total risk weighted assets = ....
