The Basel Capital Requirements Are Based Upon the Premise That

question 127

Multiple Choice

The Basel capital requirements are based upon the premise that

• A)banks with riskier assets should have higher capital ratios.
• B)banks with riskier assets should have lower capital ratios.
• C)banks with riskier assets should have lower absolute amounts of capital.
• D)banks with riskier assets should have higher absolute amounts of capital.
• E)there is no relationship between asset risk and capital.

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Definitions:

Depreciation Record

Depreciation Record is a detailed account of the depreciation amounts allocated over the life of an asset, which impacts the value of the asset on the balance sheet and the depreciation expense on the income statement.

150%-Declining-Balance

A method of accelerated depreciation, applying 150% of the straight-line rate to the declining balance of an asset, used to allocate larger depreciation expenses in the earlier years of an asset’s life.

Residual Value

The estimated value of an asset at the end of its useful life, often considered in leasing agreements and depreciation calculations.

Sum-Of-The-Years'-Digits Method

An accelerated depreciation method that computes annual depreciation by multiplying the depreciable cost of an asset by a series of fractions based on the sum of the asset's useful life digits.