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 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.
Correct Answer:
Verified
Correct Answer:
Verified
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