Question
A U.S. based commercial bank has the following assets:$150 million in U.S. Treasury securities (0 percent risk-weight category),$450 million in Fannie Mae (FNMC) mortgage backed
A U.S. based commercial bank has the following assets:$150 million in U.S. Treasury securities (0 percent risk-weight category),$450 million in Fannie Mae (FNMC) mortgage backed securities (20 percent risk-weight category), $900 million in home mortgages (50 percent risk-weight category), and $1100 million in commercial loans (100 percent risk-weight category).This bank has $98 million in Tier 1 capital (e.g., common and preferred equity) and $46 million in Tier 2 capital (e.g., ALL, subordinated debt, etc).Based on the Basel I accord calculations, what is this commercial bank's ratio of TOTAL capital to risk-weighted assets?
A.9.11 percent
B.None of the other responses are correct
C.2.80 percent
D.8.78 percent
E.5.98 percent
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