Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Nittany Lion Bank has the following balance sheet (in $m ). with the risk weights in parentheses. Nittany Lion Bank also has the following off-balance
Nittany Lion Bank has the following balance sheet (in $m ). with the risk weights in parentheses. Nittany Lion Bank also has the following off-balance sheet item: A $30 million in performance-related standby letter of credit (SLCS) to a public corporation with a conversion factor of 50%. Simplifying assumptions: - Risk weights of all off-balance sheet items are equal to 100%. - Regulator's CET1 ratio for adequate capitalization is 4.5%, Tier 1 ratio is 6.0%, and Total capital ratio is 8.0%. - There are no restrictions on how much subordinated debt and reserves you can count as Tier Il capital. - Items that do not show up on the balance sheet ( e.g., Goodwill) have a value of zero. Answer the following question using the information above. Which of the below statements is correct? Nittany Bank has enough Total, CET 1 and Tier 1 capital. Nittany Bank does not have enough Total, CET1 and Tier 1 capital. Answer the following question using the information above. To satisfy capital requirements set by the regulator: Nittany Bank needs to issue $0.625 million of common stock. Nittany Bank needs to issue $0.5 million of preffered stock. Nittany Bank needs to issue $0.5 million of common stock. Nittany Bank needs to issue $0.625 million of preferred stock. Nittany Bank needs to issue $1 million of preferred stock
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started