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University Of Cincinnati Operations And Supply Chain Management Assignment Help - Capital Equity


Question - Regulators calculate that DLC bank (see Section 2.2) will report a profit that is normally distributed
with a mean of $0.6 million and a standard deviation of $2.0 million. How much equity capital in
addition to that in Table 2.2 should regulators require for there to be 99.9% chance of the capital not
being wiped out by losses?

Table 2.2:
Summary of Balance Sheet for DLC at End of 2012 ($millions)
Assets:
Cash 5
Marketable Securities 10
Loans 80
Fixed Assets 5
Total 100

Liabilities and Net Worth:
Deposits 90
Subordinated Long-Term Debt 5
Equity Capital 5
Total 100

Table 2.3: Summary Income Statement for DLC in 2012 ($ millions)
Net interest income 3.00
Loan Losses (0.80)
Non-interest income 0.90
Non-interest expe ...Read More

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