If the Mortgages Are Securitized and Deposits Are Reduced, How

question 56

Multiple Choice

If the mortgages are securitized and deposits are reduced, how much will the bank save in the first year's reserve requirements and deposit insurance premiums in total?

• A) $144,460,800
• B) $160,512,000
• C) $165,476,200
• D) $178,332,500
• E) $181,249,300 150-6 = 144M deposits available to finance mortgages requires [(150,000,000 - 6,000,000) / (1 - 0.1)] = 160M deposits. Reserve requirements are 160M x 0.1 = 16M; Deposit insurance premiums = (160,000,000 x 0.0032) = 512,000; total = $160,512,000

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Definitions:

Debtors

Individuals or entities that owe money to others.

Contract Voided

Refers to a contract that has been declared invalid and is therefore unenforceable, as if it had never been made.

Loan Agreement

A contract between a borrower and lender outlining the terms of a loan, including repayment schedule, interest rates, and the obligations of both parties.

Interest Rate

The percentage at which interest is paid by a borrower for the use of money, or the percentage earned on a savings or investment account.