Question
In: Accounting
1, Oldhat Financial starts its first day of operations with $9 million in capital. A total...
1, Oldhat Financial starts its first day of operations with $9 million in capital. A total of $130 million in check-able deposits are received. The bank makes a $25 million commercial loan and another $50 million in mortgages, with the following term: 200 standard 30-year, fixed-rate mortgages with a nominal annual rate of 5.25%, each for $250000. What does balance sheet look like? How well capitalized is that bank? Calculate the risk-weighted assets and risk-weighted capital ratio after Oldhat’s first day.
2, Early the next day the bank invests $50 millions of its excess reserves in commercial loan. Later that day, terrible news hits the mortgage markets, and mortgage rates jump to 13%, implying a present value of its current mortgage holdings of $124798 per mortgage. Bank regulators force Oldhat to sell its mortgages to recognize the fair market value. What does Oldhat balance sheet look like? How do these events affect its capital position?
3, To avoid insolvency, regulators decide to provide the bank with $25 million in bank capital. However, the bad news about the mortgages is featured in the local newspaper, causing a bank run. As A RESULT, $30 millions in deposits is withdrawn. Show the effects of the capital injection and bank run on the balance sheet. Was the capital injection enough to stabilize the bank? If the bank regulators decide that the bank needs a capital ratio of 10% to prevent further runs on the bank, how much of an additional capital injection is required to reach a 10% capital ratio?
Solutions
ekkarill92 answered 1 year agoRelated Solutions
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52,000
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According to the articles of partnership, all profits will be
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Winston will be awarded an annual salary of $12,000 with $6,000
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assigned as follows:
Winston will be awarded an annual salary of $20,000 with
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The partners will be attributed interest equal to 10 percent of
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The partners will be attributed interest equal to 10 percent of
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The remainder will be assigned on a 5:2:3...
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