Calculate Total riskadjusted assets TRAA Formula TRAA 00 x

Calculate Total risk-adjusted assets (TRAA) Formula: TRAA - (0.0 x A1)+(0.2 x A2)(0.5 x A3)1.0 x A4) Al-reserves + government securities A2 - interbank deposits fully backed mortgage bonds + government agency securitie:s A3-municipal bonds + residential mortgages A4- other securities (such as commercial paper)+loans fixed assets (such as buildings) Data to use: Cash and Treasury Securities GNMA Mortgages FNMA Mortgages First Mortgages Common Stock Retained Earnings Preferred Stock Subordinated debt Business Loans Consumer Loans Loan Loss Reserves Fixed Assets $85 mil 310 mil 75 mil 110 mil 11 mil 37 mil 29 mil 25 mil 468 mil 580 mil -10 mill 187 mil

Solution

Formula for Total Risk Adjusted assets (TRAA) = (0.0 x A1) + (0.2 x A2) + (0.5 x A3) + (1 x A4)

(as given in question)

A1 = (Reserves) + (Government securitites) = Retained earnings + Cash and treasury security

=37 mil + 85 mil = 122 mil

A2 = Interbank deposits + fully backed mortgage bond + government agencies securities =

GNMA Mortgage + First Mortgage = 310 mil + 110 mil = 420 mil

A3 = Municipal Bonds + Residential Mortgage = FNMA Mortgage +common stock + preffered stock

= 75 mil + 11 mil + 29 mil = 115 mil

A4 = Other securities + loans + fixed assets = Subordinate debt + business loans + consumer loans + fixed assets + loan loss reserves = 25 mil + 468 mil + 580 mil - 10 mil + 187 mil = 1250

(TRAA) = (0.0 x A1) + (0.2 x A2) + (0.5 x A3) + (1 x A4)

= (0.0 x 122 mil ) + (0.2 x 420 mil ) + (0.5 x 115 mil ) + (1 x 1250 ) = 1391 mil.