An FI Funds a $5 Million Residential Mortgage in 2012

question 111

Multiple Choice

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.

Recognize the criteria for the recognition of elements in financial statements.

Comprehend financial flexibility and liquidity and their significance in financial analysis.

Identify assets likely to be reported at historical cost on the balance sheet.

Understand the concept and practical implications of liabilities in financial contexts.

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Definitions:

Organizational Buying Process

The problem-solving procedure the firm uses to meet its goals and objectives as it relates to making purchases.

Decision Criteria

involves the standards or benchmarks used to evaluate options and make choices, particularly in business or policy decisions.

Alternatives

Different options or choices available to consumers or decision-makers in any given scenario.

Need Awareness

The stage at which the salesperson is aware of the buyer’s needs and takes control of the situation by restating those needs to clarify the situation.