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| Teaching Since: | May 2017 |
| Last Sign in: | 409 Weeks Ago |
| Questions Answered: | 66690 |
| Tutorials Posted: | 66688 |
MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
3.11 Challenge Problem This problem focuses on bank capital management and various capital ratio measures. Following are recent balance sheet accounts for Prime First National Bank. Cash assets $ 17 million Loans secured by real estate 40 Commercial loans 45 Government securities owned 16 Goodwill 5 Bank fixed assets 15 Total assets $138 million Demand deposits $50 million Time & savings deposits 66 Federal funds purchased 15 Trust-preferred securities 2 Owners’ capital 5 Total liabilities $138 and owners’capital All amounts are in millions of dollars. Note: The bank has loan-loss reserves of $10 million. The real estate and commercial loans shown on the balance sheet are net of the loan-loss reserves. a. Calculate the equity capital ratio. How could the bank increase its equity capital ratio? b. Risk-adjusted assets are estimated using the following weightings process: cash and government securities = .00; real estate loans = .50; commercial and other loans = 1.00. Calculate the risk-adjusted assets amount for the bank
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