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The following entries (in millions of dollars) are from the balance sheet of Revendell National Bank (RNB): U.S. Treasury bills Demand deposits Mortgage-backed securities Loans

The following entries (in millions of dollars) are from the balance sheet of Revendell National Bank (RNB):

U.S. Treasury bills

Demand deposits

Mortgage-backed securities

Loans from other banks

C&I loans

Discount loans

NOW accounts

Savings accounts

Reserve deposits with Federal Reserve

Cash items in the process of collection

Municipal bonds

Bank building

$35

65

30

8

67

5

42

10

8

10

5

4

a. What is RNBs capital/asset ratio? Assuming the capital requirement is 10%, does the bank meet the requirement? Show your work. (10 points)

b. What is RNBs capital/risk-adjusted asset ratio given the risk factors below? Assuming the capital requirement of this ratio is 25%, does the bank meet this requirement? Show your work. (15 points)

Reserves: 0

Securities (Mortgage-backed): 0.5

Securities (Municipal bonds and Treasury bills): 0.1

C&I loans: 0.8

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