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Question
The bank is considering changing its asset mix by moving $100 million of commercial loans into Treasury securities. If it does change the asset mix and capital remains the same, the risk-based capital ratio
A. will not change because the total assets have not changed.
B. will decrease because the earnings rate on Treasuries is less than on loans.
C. will increase by 16.67 percent.
D. will increase because the assets will have less risk.
E. will change, but the direction cannot be determined with the information given.
Answer
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