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Exercise 1: Consider a financial institution with a mortgage pool with a total size of 200000...

Exercise 1: Consider a financial institution with a mortgage pool with a total size of 200000 USD. The loan to value ratio is 80 and 90 percent. The capital requirement is 8% The deposit insurance premium equals 0.45%. The reserve requirement ratio is 10%.

a) Calculate the capital requirements.

b) Calculate the reserve requirements.

c) Calculate the deposit insurance premium.

Solutions

Expert Solution

As per given question,

mortgage pool with a total size of 200000 USD

loan to value ratio is 80 and 90 percent

So total loan value will be $ 200000 x 88/100

= $176000

Now Total capital requirement @ 8% capital requirement ratio

$14080

B) Total reserve requirement will be 10% $200000

        = $20000

C) Deposit Insurance Premium- Premium you need to pay only on reserve amout

hence 0.45% of $20000

= $90

jeff jeffy answered 2 years ago
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