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 amount of demand deposits are needed to fund the mortgage?

A) $5,500,000.
B) $400,000.
C) $5,555,555.
D) $500,000.
E) $5,000,000.