On Dec. 31, 2021, a Canadian bank, called Nice Bank Ltd., reported total assets of C$50 billion. In 2021 the rate of return on assets of Nice Bank was 1.2%, the rate of return on its equity was 16% and the net interest margin was 4.8%.

(i) Suppose that the capital adequacy regulation required that every bank must have equity capital of at least 12% of its risk-weighted assets. The risk weighted assets of Nice Bank in 2021 were $32 billion. Did Nice Bank satisfy the capital adequacy requirement in 2021? (6 marks)

(ii) Assume that the banking industry average of net interest margin as 5% in 2021. Should the management of Nice Bank be concerned that its own net interest margin was only 4.8%? (3 marks)