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The bank keeps a capital-to-asset ratio of 8 percent. If the bank does not securitize the mortgages,they will be fully funded with demand deposits that have a reserve requirement of 10 percent. The demand deposits also have a deposit insurance premium of 0.20 cents per $100 of deposits. If the bank securitizes the mortgages,how much less capital will the bank require?
If the savings from not having the required reserves and the deposit insurance premiums could be invested at 5 percent,what is the dollar opportunity cost of not securitizing?
General Partner
A type of owner in a partnership who is responsible for the operations of the company and is liable for its debts.
Statutory Provisions
Laws or regulations enacted by a legislative body that must be followed by individuals and entities subject to its jurisdiction.
Safe Harbor Provisions
Legal provisions that provide protection from liability under certain conditions, often seen in regulatory contexts.
Internal Validity
The extent to which a study can establish a causal relationship between variables, free of confounding factors.
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