Question
A depository institution that has the following assets with weights as indicated: $750 million in commercial loans with one to three years maturity (100%); $50
A depository institution that has the following assets with weights as indicated:
$750 million in commercial loans with one to three years maturity (100%);
$50 million in long term treasuries (0%);
$500 million loans secured by first mortgages (50%);
$500 million in mortgage backed securities guaranteed by government agencies (20%);
$250 million in consumer loans (100%); and
$25 million in loans that are 90 days or more past due (150%).
a. How much Common Equity Tier 1 capital must the depository institution have to be considered adequately capitalized?
b. How much Tier 1 capital must the depository institution have to be considered adequately capitalized?
c. How much total Tier 1 and Tier 2 capital must the depository institution have to be considered adequately capitalized?
d. Assume the depository has Tier 1 capital as determined in part a, what is the maximum amount of total liabilities the depository institution can have and be considered adequately capitalized according to the Tier 1 leverage ratio.
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