Question

1. Compute the risk weighted assets given the following data.

Asset	Book value	Weight
Residual mortgage loans	100 million	50%
Treasury bills	100 million	0%
Municipal G. O. bonds	100 million	20%
Total	300 million

	A.	50
	B.	70
	C.	90
	D.	100

2. A bank’s reserves are computed as:

		A. Deposits with the Fed minus vault cash.
		B. Deposits with the fed plus vault cash.

Answer 1

Question 1: We have given Book values and weights of the following assets.

The risk weighted assets = Book Value * Weight

So, The addition of all the book value * weight will be the Total risk weighted assets

= 100 * 50% + 100* 0% + 100* 20%

= 50 + 0 +20

= 70

The correct answer is B

Question 2. Deposits with the fed plus vault cash.

The Total reserves of the bank is computed by the addition of valult cash and the reserves with the federal banks. Vault cash refers to the money with the banks that is used to back up the deposits of the customer in case the customer withdraw the money from their accounts. So, it gets necessary to maintain sufficient amount in reserves which is the total of money that is held by federal banks and vault cash.