Reference no: EM132745921

Questions -

(a) A bank has risk-weighted assets of $175 and equity of $12.5. If regulators require a minimum risk-weighted capital ratio of 5 percent given the current level of equity, how many new assets with a 100 percent risk weight can the bank add? How many with a 50 percent risk weight?

(b) If the bank had 20 percent more equity, how many new assets with a 100 percent risk weight could the bank add? How many with a 50 percent risk weight? How does having more equity affect a bank's ability to grow? How is this growth affected by the riskiness of the bank's assets?