10. Let%u2019s assume that you have been asked to calculate risk-based capi

10. Let%u2019s assume that you have been asked to calculate risk-based

capital ratios for a bank with the following accounts:

Cash _ $5 million

Government securities _ $7 million

Mortgage loans _ $30 million

Other loans _ $50 million

Fixed assets _ $10 million

Intangible assets _ $4 million

Loan-loss reserves _ $5 million

Owners%u2019 equity _ $5 million

Trust-preferred securities _ $3 million

Cash assets and government securities are not considered risky.

Loans secured by real estate have a 50 percent weighting factor.

All other loans have a 100 percent weighting factor in terms of

riskiness.

a. Calculate the equity capital ratio.

b. Calculate the Tier 1 Ratio using risk-adjusted assets.

c. Calculate the Total Capital (Tier 1 plus Tier 2) Ratio using

risk-adjusted assets.