Question below:

(5}. The Basel Accord requires banks to hold capital at a certain percentage of their total risk-weighed assets. The assets are allocated into four categories, each with a different weight to reect the degree of credit risk (see the table below). Risk weight Asset categories 0% Reserves and government securities Claims on banks (e.g., holdings of bonds issued by other banks) 50% Municipal bonds, residential mortgages 100% Loans to consumers and companies Consider a bank with the following balance sheet: Assess Liabi'es & Equity Desired Reserves $9.6 million We Deposits $120 million Excess Resenres $1.4 million Treasuryr bills $20 million Bank Capital $ 6 million Residential mortgages $45 million Commercial Loans $50 million (a) Calculate the bank's risk-weighted capital ratio. (3 points) (b) Suppose that the bank regulator decides that the bank needs a risk-weighted capital ratio of 10%. Based on the bank's balance sheet, hots.r much of an additional capital injection is required in order to reach the 10% target? (2 points)