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You decide to fund a $5 million residential mortgage in 2018 by allocating capital and by issuing demand deposits. The mortgage represents a loan-to-value of

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You decide to fund a $5 million residential mortgage in 2018 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 is the minimum capital requirement on the mortgage in order for the institution to be adequately capitalized? Show work and briefly discuss

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