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Question
An FI funds a $5 million residential mortgage in 2012 by allocating capital and by issuing demand deposits. The mortgage represents a loan-to-value of 70 percent. The demand deposits have a reserve requirement of 10 percent and a deposit insurance premium of 23 basis points.
What is the minimum capital requirement on the mortgage in order for the institution to be adequately capitalized?
A. $0.
B. $400,000.
C. $200,000.
D. $500,000.
E. $5,000,000.
Answer
This answer is hidden. It contains 227 characters.
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