Commercial Bank Ltd.

Balance sheet

As at 31/12/2020

Assets $(000) Liab. & Equity $(000)

Cash 80,000 Payables 280,000

Investments 150,000 Deposits 500,000

Loans 650,000 Long-term bonds 80,000

Other 100,000 Equity 120,000

Total 980,000 980,000

The investment portfolio comprises shares in a subsidiary company (20%), a zero-coupon bond (30%), government bonds (20%) and shares in publicly traded companies (30%).

Due to covid 19, the loan portfolio has 8% delinquency and the average return is 7%.

Deposits are primarily short term. The renewal rate is declining and expected to continue into the medium term. The average deposit rate is 2%.

Interest rates are expected to rise in the short term.

A Based on the balance sheet and the information above, identify three risks

facing the bank? Explain. (6 marks)

B Recommend to management one strategies to reduce each risk (6 marks)

C Discuss the banks capital adequacy based on the information given (3 marks)

Can I please have part C answered in particular.