. National Bank has the following balance sheet (in millions) and has no off-balance-sheet activities.What is the CET1 risk-based ratio?What is the Tier I risk-based capital ratio?What is the total risk–based capital ratio? . National Bank hasthe following balance sheet (in millions) and has no off-balance-sheet activities.Liabilities and Equity$ 20 DepositsSubordinateddebenturesAssetsCash$ 980Treasury bills4025Residential mortgagesCommon stock45(category 1;loan-to-valueratio = 70%)Retained earningsTotal liabilities and40600equity$1,090Business loans430Total assets$1,090

Bank classified the total asset into Tier 1 and Tier 2. Total risk capital is the sum of Tier 1 and Tier 2 capital. Risk adjusted asset is calculated by multiplying the risk weights with the individual asset.CET 1 risk based ratio= ($45+ $40)/$1090*100= 7.80%Calculation of risk adjusted asset Risk adjusted asset= (Cash*0%+ Treasury Bills*0% + Residential Mortgage*50% + Business Loan*100%) = $ 600*50% + $ 430 =$ 730 Tier 1 risk based capital ratio= ($45+ $40)/$730*100= 11.64 %Total risk based capital ratio= ($ 25 + $45+ $40)/$730*100= 15.07 %

Answered: National Bank has the following balance…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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. National Bank has the following balance sheet (in millions) and has no off-balance-sheet activities.

What is the CET1 risk-based ratio?
What is the Tier I risk-based capital ratio?
What is the total risk–based capital ratio?

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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