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What will the new value of each ratio be

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Question: Onshore Bank has $20 million in assets, with risk-adjusted assets of $10 million. Tier I capital is $500,000 and Tier II capital is $400,000. How will each of the following transactions affect the value of the Tier I and total capital ratios? What will the new value of each ratio be?

The current value of the Tier I ratio is 5 percent and the total ratio is 9 percent

a. The bank repurchases $100,000 of common stock with cash.

b. The bank issues $2 million of CDs and uses the proceeds to issue mortgage loans.

c. The bank receives $500,000 in deposits and invests them in T-bills.

d. The bank issues $800,000 in common stock and lends it to help finance a new shopping mall.

e. The developer has an A+ credit rating. The bank issues $1 million in nonqualifying perpetual preferred stock and purchases general obligation municipal bonds.

f. Homeowners pay back $4 million of mortgages and the bank uses the proceeds to build new ATMs.

Reference no: EM131633070

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