Answer: $27.0 million

## Explanation Under the Basic Indicator Approach (BIA) for operational risk capital calculation: **Key Formula:** Capital Charge = α × [Σ(GI₁...ₙ) ÷ n] Where: - α = 15% (fixed percentage) - GI = Gross Income for each year (positive values only) - n = number of years with positive gross income **Given Data:** - Year T-3: +$130 million (positive) - Year T-2: -$60 million (negative - exclude from calculation) - Year T-1: +$230 million (positive) **Calculation Steps:** 1. Only include years with positive gross income: T-3 and T-1 2. Sum of positive gross income = $130 million + $230 million = $360 million 3. Number of years with positive income = 2 4. Average gross income = $360 million ÷ 2 = $180 million 5. Capital charge = 15% × $180 million = $27 million **Why other options are incorrect:** - **$15.0 million**: This would result from using all 3 years including the negative year - **$18.0 million**: This doesn't match the proper BIA calculation - **$34.5 million**: This would be 15% of $230 million only, ignoring the other positive year The correct answer is **$27.0 million**.

Author: LeetQuiz .