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First Bank has the following balance sheet in millions of dollars with the Basel II risk weights given in parentheses: Table 1: Assets Amount Liabilities
First Bank has the following balance sheet in millions of dollars with the Basel II risk weights given in parentheses: Table 1: Assets Amount Liabilities Amount U.S. Govt T-Bonds (0%) $150 Deposits $1,420 Municipal Bonds (20%) $250 Subordinated Debt (Tier II) $20 High Yield Corporate bonds (50%) $350 Preferred Stock (Tier II) $25 Consumer Loans AAA-rated (20%) $450 Commercial Loans BBB-rated (100%) $300 Equity (Tier I) $35 Total $1,500 Total $1,500 Question 4: Based on the information from table 1 in Question 3 answer the following: The bank wishes to keep its Tier 1 capital ratio at 6% of risk adjusted assets. It will sell a portion of its High-Yield Corporate Bonds and invest the proceeds in U.S. government bonds. In terms of dollars, how much of the Corporate Bonds should the bank sell and then reinvest in U.S. government bonds? Show your answer to the nearest whole dollar in the xx format, $86 enter as 86
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