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2. Using the entries above, what is this bank's leverage ratio? Given that US regulators require a minimum Tier 1 ratio of 5% is this bank undercapitalized or overcapitalized? Topic 9: Economics of Banking (15 pts) 1. Use the following entries to calculate total bank capital. What is this bank's total capital given these entries? (show work) The following entries are from the actual balance sheet of a U.S. bank: Cash, including cash items in the process of collection $121 Non-Interest-bearing deposits 275 Deposits with the Federal Reserve 190 Commercial loans 253 Long-term bonds (issued by the bank) 439 Real estate loans 1550 Commercial paper and other short-term borrowing 70 Consumer loans 950 Interest-bearing deposits 1800 Buildings and equipment 16 Other liabilities 491 Note: Values are in billions of dollars. 2. Using the entries above, what is this bank's leverage ratio? Given that US regulators require a minimum Tier 1 ratio of 5% is this bank undercapitalized or overcapitalized? 3. Given you answer in part 2, give an example of how this bank can fix their leverage ratio to comply with the regulators. 4. Calculate this bank's leverage. Briefly describe how moral hazard contributes to a commercial bank's leverage. 2. Using the entries above, what is this bank's leverage ratio? Given that US regulators require a minimum Tier 1 ratio of 5% is this bank undercapitalized or overcapitalized? Topic 9: Economics of Banking (15 pts) 1. Use the following entries to calculate total bank capital. What is this bank's total capital given these entries? (show work) The following entries are from the actual balance sheet of a U.S. bank: Cash, including cash items in the process of collection $121 Non-Interest-bearing deposits 275 Deposits with the Federal Reserve 190 Commercial loans 253 Long-term bonds (issued by the bank) 439 Real estate loans 1550 Commercial paper and other short-term borrowing 70 Consumer loans 950 Interest-bearing deposits 1800 Buildings and equipment 16 Other liabilities 491 Note: Values are in billions of dollars. 2. Using the entries above, what is this bank's leverage ratio? Given that US regulators require a minimum Tier 1 ratio of 5% is this bank undercapitalized or overcapitalized? 3. Given you answer in part 2, give an example of how this bank can fix their leverage ratio to comply with the regulators. 4. Calculate this bank's leverage. Briefly describe how moral hazard contributes to a commercial bank's leverage

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