FRM Part I · FRM Exam Part I · Banks
A bank has the following exposures: USD 200 million of residential mortgages at a 35% risk weight, USD 300 million of corporate loans at a 100% risk weight, and USD 100 million of government bonds at a 0% risk weight. Ignoring all other items, what is the minimum total capital required if the total capital requirement is 8% of risk-weighted assets?
Minimum capital is USD 29.6 million. Risk-weighted assets are 70 million for mortgages, 300 million for corporate loans and zero for government bonds, totaling 370 million. Multiplying by the 8% requirement gives 29.6 million.
- AUSD 40.0 million
- BUSD 30.4 millionCorrect
- CUSD 48.0 million
- DUSD 29.6 million
Explanation
RWA = 200×0.35 + 300×1.00 + 100×0 = 70 + 300 = USD 370 million. Capital = 8% × 370 = USD 29.6 million. Wait: 0.08×370 = 29.6, so the correct figure is USD 29.6 million.
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