[Solved] Which of the following statements about Risk Weighted Assets (RWA) is correct? — Ans: RWA assigns risk weights to different asset classes based on credit risk | Financial Awareness

Financial Awareness - Risk, Stability & Emerging Finance

Which of the following statements about Risk Weighted Assets (RWA) is correct?

ARWA includes only government securities held by the bank

BRWA is the total amount of cash reserves held by a bank

CRWA assigns risk weights to different asset classes based on credit risk

DRWA is the total deposits collected by the bank

Step-by-Step Solution

Step 1: Understand RWA concept
RWA measures assets weighted by their credit risk to assess capital requirements.
Step 2: Analyze options
Only the option describing risk weights assigned to asset classes is correct.
Final Answer:
RWA assigns risk weights to different asset classes based on credit risk → Option C
Quick Check:
RWA = assets weighted by credit risk ✅

Quick Trick: RWA reflects riskiness of bank's assets

Common Mistakes:

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Which of the following statements about Risk Weighted Assets (RWA) is correct?