Fifth Bank Has the Following Balance Sheet with Values Stated

question 67

Multiple Choice

Fifth Bank has the following balance sheet with values stated in millions of dollars.All assets are associated with corporate customers (not governments or sovereigns) .Refer to Table 20-8 for associated risk weights. $\begin{array}{ll}\text { Cash } & \$ 80& \text { Deposits } &\$550\\\text { Municipal General Obligation } & \$ 100 \\\text { Bonds } & \\\text { Residential Mortgages 1-4 } & \$ 220& \text { Long-Term Debt }&\$290 \\\text { family (LTV 60\%-80\%) } & \\\text { Conmercial loans } & \$ 500&\text { Equity } & \$60 \\\text { Total Assets } & \$ 900&&\$ 900\end{array}$ In addition,Fifth Bank has off-balance sheet items as follows: (Refer to Tables 20-10 and 20-11)
$50 million in commercial letters of credit (LCs) ,
$300 million in 3-year interest rate swaps that are in-the-money by $2 million
$50 million in 4-year forward FX contracts that are out-of-the money by $2 million
What is the minimum Tier 1 and Total risk-based capital Fifth Bank needs in order to be considered adequately capitalized under Basel III capital requirements for both on-balance sheet and off-balance sheet items?

• A)$40.71 million;$63.0 million.
• B)$38.91 million;$51.88 million.
• C)$51.88 million;$64.85 million.
• D)$50.40 million;$67.5 million.

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Definitions:

Predetermined Overhead Rate

A calculated rate used to allocate manufacturing overhead costs to products based on a certain activity base like labor hours or machine hours.

Traditional Costing

A costing method that allocates overhead based on a predetermined rate, often leading to less accuracy in product costing.

Direct Labor-Hours

The total number of working hours spent by employees directly involved in manufacturing goods, critical for computing production costs.

Unit Product Cost

The total cost associated with producing a single unit of product, including direct materials, direct labor, and manufacturing overhead.