In this workout, we're being asked to calculate the amount of risk weighted assets using the Basel One Assumptions and hopefully we can highlight some of the weaknesses here about Basel One and their assumptions. We've been given a bunch of assets here from cash, accounts receivables, all the way to property, plant, and equipment. And notably, this bank here has mortgage loans, has got a commercial loan to Apple and a commercial loan to United Airlines. The idea here is of course that Apple is a relatively safe company. United Airlines is possibly a bit more risky. Let's see what happens when we calculate the risk weightings here. Well, in the menu below we get the risk weighting requirements under Basel One, cash of course zero, mortgage loans somewhat risky, 50%. All private company loans 100%, and all other assets 100%.

Okay, so let's calculate our risk weighted assets. Well, we start with our cash position, 100, times the risk waiting for cash, which is zero, unsurprisingly. We then say, well, let's look at our mortgage loans here they're 5,000 times the risk waiting for mortgage loans. That's the mortgage loans done. Then we look at our other loans, our commercial loan to Apple, 500, times the private company loans risk weighting 100, and then crucially we're gonna do the same to the loan to United Airlines. So the loan to United Airlines is going to be the 500 times the 100% risk weighting again.

So this highlights a weakness of Basel One here where we're applying the same risk weighting to Apple as we do to United Airlines. And then finally, we pick up all the other assets which is gonna be PP&E, that's gonna have 100% risk weighting. And we're gonna pick up our accounts receivables and we're gonna give that a risk weighting of 100% as well. Click enter. And our total risk weighted assets here are 3950. Again, part of the point here is to show to you that this is a relatively crude method. Basel One assigns the same risk weighting to loans that could possibly be different in terms of their riskiness.