Solved

Sigma Bank Has the Following Balance Sheet in Millions of Dollars.Unless

question 34

Multiple Choice

Sigma Bank has the following balance sheet in millions of dollars.Unless mentioned otherwise, all assets are associated with corporate customers (not governments or sovereigns) .Values are in millions of dollars.Refer to table 20-8 for appropriate risk weights. $\begin{array} { | l | r | l | r | } \hline \text { Cash } & \$ 40 & \text { Deposits } & \$ 370 \\\hline \begin{array} { l } \text { Municipal General } \\\text { Obligation Bonds }\end{array} & \$ 60 & & \\\hline \begin{array} { l } \text { Residential Mortgages } \\\text { 1-4 family } \\\left( 80 \% { - 90\% } \text { LTV } \right) \end{array} & \$ 100 & \begin{array} { l } \text { Perpetual Preferred } \\\text { Stock }\end{array} & \$ 20 \\\hline \begin{array} { l } \text { Commercial loans } \\\text { BB + rated }\end{array} & \$ 200 & \text { Equity } & \$10\\\hline \text { Total Assets } & \$ 400 & & \$ 400 \\\hline\end{array}$ Off balance sheet contingent liabilities (Refer to Table 20-10) $40 million direct-credit substitute standby letters of credit issued to a U.S.corporation.
$40 million commercial letters of credit issued to a corporation
Off-balance sheet derivatives (Refer to Table 20-11)
$200 million 10-year interest rate swaps
$100 million 2-year forward DM contracts
What is the credit equivalent amount of the off-balance-sheet foreign exchange contracts if it is out-of-the-money by $4 million?

Definitions:

Drunkards

Individuals who habitually consume alcohol to excess, often leading to social, legal, or health issues.

Occasional Drinker

A person who consumes alcoholic beverages infrequently or in moderation.

Tax-Supported School Systems

Public education systems funded primarily through taxation, providing free or subsidized schooling to children in the community.

Liberia

A country in West Africa known for being founded by freed American and Caribbean slaves in the 19th century.