Newhart Financial starts its first day of operation with $10 million capital, and receives checking deposits worth of $200 million. The bank makes a $70 million commercial loan and another $60 million in mortgages, with the following terms: 300 standard 30 year, fixed mortgages with a nominal interest of 5%, each for $200,000. Assume the required reserve ratio is 10%.
a. What does the bank balance sheet look like?
b. How well is capitalized is the bank?
c. Calculate the risk-weighted assets and risk-weighted capital ratio after Newharts first day.