ABC Bank funds a $120,000 residential mortgage by issuing demand deposits. The mortgage has a risk weight of 50%. The demand deposits have a reserve requirement of 12% and a deposit insurance premium of 3.6% per dollar of deposits issued. Suppose the bank fund the mortgage by issuing demand deposits, what is the deposit insurance premium on the deposits issued to fund the mortgage?

Answer rating: 100% (QA)

Step 1 Determine the amount of demand deposits issued to fund the mortgage ... View the full answer