What is the RBC factor for Class 4 Preferred Stock?

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What is the RBC factor for Class 4 Preferred Stock?

RBC factors convert asset holdings into a capital charge that reflects risk. For each asset class, you multiply the asset value by its assigned factor to get the amount of risk-based capital that must be held. Class 4 Preferred Stock is given a moderate risk weight because it has equity-like characteristics (dividends and potential for loss) but sits senior to common stock and behind debt in liquidation. This balance results in a 4.5% factor. So the charge is 0.045 times the value of the Class 4 Preferred Stock. For example, holding $1,000,000 of this stock would produce a $45,000 RBC charge. The other options are either too small or too large for this asset class within the RBC framework.

RBC factors convert asset holdings into a capital charge that reflects risk. For each asset class, you multiply the asset value by its assigned factor to get the amount of risk-based capital that must be held. Class 4 Preferred Stock is given a moderate risk weight because it has equity-like characteristics (dividends and potential for loss) but sits senior to common stock and behind debt in liquidation. This balance results in a 4.5% factor. So the charge is 0.045 times the value of the Class 4 Preferred Stock. For example, holding $1,000,000 of this stock would produce a $45,000 RBC charge. The other options are either too small or too large for this asset class within the RBC framework.

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