An FI Operating in the United States Funds a US$5

Multiple Choice

An FI operating in the United States funds a US$5 million residential mortgage in 2014 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 to FDIC 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.