A bank has the following transaction with an AA-rated corporation

(a) A two-year interest rate swap with a principal of $100 million that is worth $3 million

(b) A nine-month foreign exchange forward contract with a principal of $150 million that is worth -$5 million

(c) A long position in a six-month option on gold with a principal of $50 million that is worth $7 million

Add-on Factors (% of Principal) for Derivatives

Remaining Maturity (yrs)	Interest rate	Exch Rate and Gold	Equity	Precious Metals except gold	Other Commodities
<1	0.0	1.0	6.0	7.0	10.0
1 to 5	0.5	5.0	8.0	7.0	12.0
>5	1.5	7.5	10.0	6.0	15.0

1. Assuming the corporation has a risk weight of 50% for off-balance sheet items, what is the required capital under Basel I if there is no netting?

2. What difference does it make if the netting amendment applies?