I have this huge word problem I\'m trying to get through and I don\'t think I\'m
ID: 2754443 • Letter: I
Question
I have this huge word problem I'm trying to get through and I don't think I'm doing it right. I need to learn it for my upcoming test, so if you could work it all out that would be amazing. Thank you. If you have any questions you can ask me on the comments, it's on an excel spreadsheet so it looks a little different.
Balance Sheet for First Russellville Bank Assets Liabilities Vault Cash $90.00 Checking Accounts $700.00 Deposits at the Fed $100.00 Savings Accounts $300.00 Treasury Bills (3 month) $625.00 5 year CDs $200.00 Mortgages (30 years) $1,250.00 NOW Accounts $741.00 Capital Question 45) The regulators at the FDIC decide to change the capital requirement in order to help prevent another bank crisis. They increase their capital requirement by 1.3 percentage points. What is the current required capital ratio? What is the new capital ratio? What is the new capital requirement in dollars? Answer: Balance Sheet for First Russellville Bank Assets Liabilities Vault Cash $90.00 Checking Accounts $700.00 Deposits at the Fed $100.00 Savings Accounts $300.00 Treasury Bills (3 month) $625.00 5 year CDs $200.00 Mortgages (30 years) $1,250.00 NOW Accounts $741.00 Capital Question 46) Explain how you would bring the bank into compliance with the new capital requirement described in question 45. Show on the balance sheet below how First Russellville Bank might meet the new requirement. Answer: Balance Sheet for First Russellville Bank Assets Liabilities Vault Cash Checking Accounts Deposits at the Fed Savings Accounts Treasury Bills (3 month) 5 year CDs Mortgages (30 years) NOW Accounts New Loans Capital New Capital Ratio = New Investment = New Capital = Question 47) In the space below explain how you would bring the bank into compliance with the capital requirement. This is NOT a description of how you calculated your answer. This is an explanation of the actions the bank needs to make.Explanation / Answer
Q45)the current required capital ratio
Total Assets=90+100+625+1250=2065
Total Liabilities=700+300+200+741=1941 =>Capital =2065-1941 =124
Total Risk weighted Assets(multiply risk weights for each asset with respective Asset value) =0*90+0*100+0*625+50%*1250=625
current capital ratio=Capital/Total Risk weighted Assets=124/625=0.1984 or 19.84%
New capital ratio=19.84%+1.5%=21.34 %
new capital requirement in dollars=New capital ratio*Total Risk weighted Assets=.2134*625=133.375