A Bank Provides Documentary Letters of Credit for a Company

A bank provides documentary letters of credit for a company that has a credit rating of A+.The face value of contracts outstanding is $2 million.Calculate the dollar value of capital required under the capital adequacy requirements to support these facilities,given that the bank supervisor's credit conversion factor is 20%.

A) $6 400
B) $16 000
C) $160 000
D) $240 000

Correct Answer:

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