RORAC
RORAC stands for Return on Risk-Adjusted Capital. It's like a game where you want to make as much money as possible while still being safe. Think of it like selling lemonade and trying to earn money, but also making sure you have enough supplies to keep selling more lemonade.
In the game of RORAC, you want to make as much money as possible with the money you have, but you also don't want to take too much risk and lose all of your money. Think of it like a see-saw. You want to have just enough weight on each side so it stays balanced.
Your bank plays this game too! They want to make money by investing your money in things like loans or buying bonds. But at the same time, they don't want to lose all of your money either! So, they have to be careful! They use a tool called RORAC to determine how much money they can make while still being safe.
Think of it like a computer. The bank puts in information like how much money they have and what they want to invest in. The computer then calculates how much money they can make while still being safe. The bank also has to make sure they have enough money to pay if someone comes in and wants to take all their money out of their account.
So, in the end, RORAC is a tool that banks use to make smart decisions about how they invest their money and make sure they don't lose it all. Just like in the game of lemonade selling, they want to make the most money while still keeping things safe and balanced.
In the game of RORAC, you want to make as much money as possible with the money you have, but you also don't want to take too much risk and lose all of your money. Think of it like a see-saw. You want to have just enough weight on each side so it stays balanced.
Your bank plays this game too! They want to make money by investing your money in things like loans or buying bonds. But at the same time, they don't want to lose all of your money either! So, they have to be careful! They use a tool called RORAC to determine how much money they can make while still being safe.
Think of it like a computer. The bank puts in information like how much money they have and what they want to invest in. The computer then calculates how much money they can make while still being safe. The bank also has to make sure they have enough money to pay if someone comes in and wants to take all their money out of their account.
So, in the end, RORAC is a tool that banks use to make smart decisions about how they invest their money and make sure they don't lose it all. Just like in the game of lemonade selling, they want to make the most money while still keeping things safe and balanced.