Consider an FI with the Following Off-Balance-Sheet Items: a Two-Year

question 37

Multiple Choice

Consider an FI with the following off-balance-sheet items: A two-year loan commitment with a face value of $120 million, a standby letter of credit with a face value of $20 million and trade-related letters of credit with a face value of $70 million.All counterparties have a credit rating of BBB.What is the capital amount the FI needs to hold against these exposures?

• A)$5.04 million
• B)$7.52 million
• C)$8.4 million
• D)$24.8 million

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Definitions:

Burning Fossil Fuels

The combustion of coal, oil, natural gas, and other fuels derived from geological formations, releasing energy but also pollutants and greenhouse gases.

Air Pollution

The presence in or introduction into the air of a substance which has harmful or poisonous effects.

Hydrogen Ions

Positively charged ions (protons) formed when hydrogen atoms lose their electrons, often playing a significant role in chemical reactions and acidity.

Corrosive

Describing a substance that has the ability to wear away or destroy other materials through a chemical reaction, often leading to damage or deterioration.