Explanation:
Recall that the total risk-weighted assets for N on the balance-sheet items is given by the following expression:
Therefore:
The total risk weighted assets = 267 \times 1 + 79 \times 0.5 = \`306.5`$ Million
Note: Cash and securities issued by governments of OECD countries (members of the Organisation of Economic Co-operation and Development) are considered to have virtually zero risk and have a risk weight of zero. It is loans to banks and government agencies in OECD countries that have a risk weight of 20%.
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Q.2994 Suppose that G&R Bank’s assets are made up of $267 million of corporate loans, $17 million of OECD government bonds, and $79 million of residential mortgages. We are also given that corporate loans have a risk weight of 100%, loans to government agencies and banks in OECD countries carry a risk weight of 20%, and mortgages have a risk weight of 50%. Compute the total risk-weighted assets under Basel I regulation.
A
$520.7 million
B
$306.5 million
C
$267.4 million
D
$487.6 million
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