An FI Funds a $5 Million Residential Mortgage in 2012

question 76

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 would have been the capital requirements if the FI had securitized the mortgage?

• A)$0.
• B)$400,000.
• C)$200,000.
• D)$500,000.
• E)$5,000,000.

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