Question: Finance

Fells Wargo Bank has the following balance sheet (in millions): Assets Liabilities and Equity Type |$million Risk Category ype $million A-rated Commercial loans i700 1 Deposit 1200 Residential mortgages I300 1 Subordinated bonds 200 C-rated Commercial loans |200 2 Common stock 20 Cash I300 3 Retained Earnings 80 In addition, the bank has a $10 million performance-related standby letter of credit to a company in the risk category 2 and $50 million in 6month FX fowvard contracts with a replacement cost of - $1 million. The bank's assets fall in 3 categories (Category 1 3) with various levels of credit risk. The risk weight assigned to each category is one of the following three: 0, 50%, 100% where each weight corresponds to one asset category in the table. The ordering of asset categories in the balance sheet is RANDOM. You need to decide which weight to use for each asset category. The conversion factor for the performance-related standby LC is 50% and that for the FX forward contract is 1%. What is the bank's risk-based Common Equity Tier1 capital ratio? Select one: ' a. 14.3% b. 14.22% ' c. 14.17% ' d. 6.67% ' e. None of the options