A bank in Heidelberg Germany has €400 million in assets in the 0 percent risk we

Question

A bank in Heidelberg Germany has €400 million in assets in the 0 percent risk weight category, €1000 million in assets in the 20 percent risk weight category, €5000 million in assets in the 50 percent risk weight category and €8000 million in assets in the 100 percent risk weight category. This bank has €669 million in core (Tier 1) capital (e.g., common and preferred equity) and €115 million in Tier 2 capital (e.g., ALL, subordinated debt, etc.). What is this bank's ratio of Tier 1 capital to risk-weighted assets?

7.23 percent

6.25 percent

None of the other responses are correct

1.04 percent

6.03 percent

7.23 percent

6.25 percent

None of the other responses are correct

1.04 percent

6.03 percent

Explanation / Answer

Total risk weighted assts=400*0+1000*.2+5000*.5+8000*1

=$10,700

Ratio =Tier1 capital/Risk weigjted assets=$669/$10,700*100=6.25%

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