Under Basel I, the Credit Equivalent Amount (CEA) for derivatives is calculated as the sum of current exposure and potential future exposure (add-on): $CEA = \max(\text{Current Value}, 0) + (\text{Add-On Factor} \times \text{Notional Principal})$

For each transaction: (a) Seven-year interest rate swap:

• Notional = $400 million
• Current Value = -$3 million
• Remaining Maturity > 5 years, Add-on factor = 1.5% = 0.015
• CEA_a = \max(-3, 0) + (0.015 \times 400) = 0 + 6 = \`6` \text{ million}$

(b) Three-year interest rate swap:

• Notional = $170 million
• Current Value = $7 million
• Remaining Maturity 1 to 5 years, Add-on factor = 0.5% = 0.005
• CEA_b = \max(7, 0) + (0.005 \times 170) = 7 + 0.85 = \`7.85` \text{ million}$

(c) Four-month derivative on a commodity:

• Notional = $80 million
• Current Value = $4 million
• Remaining Maturity < 1 year, Add-on factor for Other Commodities = 10.0% = 0.10
• CEA_c = \max(4, 0) + (0.10 \times 80) = 4 + 8 = \`12` \text{ million}$

Total CEA = 6 + 7.85 + 12 = \`25.85\text{ million}$. Risk-Weighted Assets (RWA) = Total CEA $\times$ Counterparty Risk Weight =$25.85` \times 0.5 = 12.925 \text{ million}$. Minimum Capital Requirement = RWA $\times`$8% = 12.92`5 \times 0.08 = \`1.03`4 \text{ million}$.