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In: Economics

You are the employed by the First National Bank. This bank has $5 million in capital....

You are the employed by the First National Bank. This bank has $5 million in capital. They have $100 in checkable deposits. Of that they keep only the 10% required reserves and loan the rest out. In $45 million in business loans and $50 million in residential mortgages. How well capitalized is First National Bank? Calculate the risk weighted level of assets and risk weighted leverage ratio. Why are leverage (capital) ratios important for financial regulators and institutions?

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