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ASSETS VALUE ($million) $100 Municipal Bonds $150 Residential Mortgages $250 Commercial Loans $500 $100 $1,100 Cash Junk Bonds Total Assets CREDIT RISK WEIGHT 0% 20% 35% 100% 150% Star Bank has $57 million in Common Equity Tier 1 (CET1) ca

ASSETS VALUE ($million) $100 Municipal Bonds $150 Residential Mortgages $250 Commercial Loans $500 $100 $1,100 Cash Junk Bonds Total Assets CREDIT RISK WEIGHT 0% 20% 35% 100% 150% Star Bank has $57 million in Common Equity Tier 1 (CET1) ca

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Star Bank has the following asset portfolio on its balance sheet (and zero off-balance-sheet business). VALUE CREDIT ($million) RISK WEIGHT $100 0% Municipal Bonds $150 20% Residential Mortgages $250 35% Commercial Loans $500 100% $100 150% $1,100 ASSETS Cash Junk Bonds Total Assets Star Bank has $57 million in Common Equity Tier 1 (CET1) capital. What is the bank's CET1 risk-based capital ratio (assuming there is no market risk or operational risk)? Select one: a. 8.2 percent O b. 7.43 percent O c. 5.7 percent O d. 5.18 percent
Transcribed Image Text:Star Bank has the following asset portfolio on its balance sheet (and zero off-balance-sheet business). VALUE CREDIT ($million) RISK WEIGHT $100 0% Municipal Bonds $150 20% Residential Mortgages $250 35% Commercial Loans $500 100% $100 150% $1,100 ASSETS Cash Junk Bonds Total Assets Star Bank has $57 million in Common Equity Tier 1 (CET1) capital. What is the bank's CET1 risk-based capital ratio (assuming there is no market risk or operational risk)? Select one: a. 8.2 percent O b. 7.43 percent O c. 5.7 percent O d. 5.18 percent
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