1. ********Please ignore the question in the photo
2. The risk weighted assets of BIG Bank are ________$ (no rounding!). Therefore its capital ratio is _________(more/less) than 10%.
3. If 15 percent of Subprime Quick Money loan pool is written off, the value of BIG Bank AAA tranche holding will be $_____ and its Ba1 tranche holding will be valued at $________. Big Bank's Equity will change to $_________. Is this still 10% of its RWA?
4. If Big Bank would have invested $20 directly into MBS (the same type of loans as Quick Money) and 15% of the underlying loans would have defaulted, the loss for Big Bank would have been exactly $__________. This would have been ___________(better / worse) than the investment in the tranches.
5. Continue with your balance sheet from b) after the losses. If Big Bank would swap all its loans against Quick Money A3 tranches, its RWA would change to $___________ (no rounding!). Check if Big Bank is now achieving its minimum CAR of 10% again.
6. If Clever Bank keeps all its loans on its balance sheet, its RWA would be exactly $_________m. However, if it does the deal with Quick Money its RWA would be $____________m. This is an __________ (advantage/disadvantage) for a capital management point of view. Did the actual riskiness of the assets change?