QUESTION FIVE The following is an extract from the asset side of the balance she

Question

QUESTION FIVE The following is an extract from the asset side of the balance sheet of a commercial bank incorporated in Zambia. Asset Treasury Bils Interbank Loans Mortgages Consumer Loans Corporate Loans Total Kwacha 100,000 500,000 300,000 200,000 200,000 1,300,000 a) What is the total of the Banks risk weighted assets? (5 marks) b) The Bank has K35,000 in its Tier 1 capital. Does the Bank meet its primary regulatory capital requirement? (5 marks) c) The Bank's Tier II capital amounts to K20 million. What is the total capital adequacy position of the Bank? (10 marks) QUESTION SIX current price of compapv B onerating in an efficient market is CCCO nice Of omnanr Reratine in an efficient market is K100 per share.

Explanation / Answer

As per norms of The Banking and Financial Services (Capital Adequacy) Regulations, 1995, which is applicable to Banks in Zambia, below mentioned is the % of risk for calculation of risk-weighted assets, which should be taken into consideration.

a) So the total of the Banks risk-weighted assets is as below.

Assets % i) Treasury bills 0% ii) Interbank loans 20% (assuming residual maturity of 12 months, otherwise 100% for more than 12 months) iii) Mortgages 50% iv) Other assets   100% (Consumer and corporate loans)

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