Lets assume that you have been asked to calculate risk-based capital ratios for a bank with the following accounts.

Cash 7 million

Government Securities: 9 million

Mortgage loans 25 million

Other loans 55 million

Fixed assets 8 million

Intangile assets 5 million

Loan-loss reserves 4 million

Owners equity 6 million

Trust-preferred securities 3 million

Cash assets and government securities are not considered risky.

Loans secured by real estate have a 50% weighting factor.

All other loans have a 100 % weighting factor in term of riskiness.

Calculate the equity capital ratio. Calculate the Tier 1 Ratio using risk-adjusted assets. Calculate the Total Capital (Tier 1 and Tier 2) Ratio using risk-based assets.