Using a loan amount of $10,000,000 with a capital requirement of 12% and a capital ratio of 25%, how much is the risk-adjusted capital?

To determine the risk-adjusted capital, you need to calculate the capital requirement based on the loan amount provided. The capital requirement is calculated by multiplying the loan amount by the capital requirement percentage.

In this case, with a loan amount of $10,000,000 and a capital requirement of 12%, the calculation would be as follows:

Risk-adjusted capital = Loan amount x Capital requirement

Risk-adjusted capital = $10,000,000 x 12%

Calculating this gives you:

Risk-adjusted capital = $1,200,000

However, the capital ratio of 25% indicates the proportion of risk-adjusted capital that must be maintained against the loan. To find the amount of capital that corresponds to this ratio, you would take the risk-adjusted capital amount and apply the capital ratio:

Actual capital to be held = Risk-adjusted capital x Capital ratio

Actual capital to be held = $1,200,000 x 25%

Actual capital to be held = $300,000

Thus, the correct answer is based on the calculation that combines the capital requirement and the capital ratio to derive the total amount of risk-adjusted capital needed for the loan. This insightful calculation is essential for understanding how financial