In this exercise, we're simply asked to calculate the amount of tier 1 capital and total capital available for regulatory purposes under Basel I. We've been given a balance sheet here with a number of items. So where do we start? Well, tier 1 capital, what's the tier one capital going to be? Well, it's gonna start with our equity position and that's gonna be our common stock and our retained earnings. However, we're gonna have to deduct goodwill in order to get to our tier one capital. And why do we deduct goodwill? Well, goodwill is deemed to be worthless in the case of a bankruptcy scenario for the bank because the goodwill represents future profits in an acquired subsidiary. Right, so let's go. The tier 1 capital therefore is our common stock, our retained earnings minus our goodwill position, 400. In addition to this, this bank has some tier 2 capital. It's usually designated as supplementary capital and it's usually composed of items, such as revaluation reserves, undisclosed reserves, hybrid instruments, or subordinated term debt. So we're gonna add on our tier 2 capital, 300, to our tier 1 capital of 400 and get a total capital position of 700.