compute the capital requirement under the Basel II IRB approach, the standardized approach of Basel II, and under Basel I?

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2 Consider a fifteen-year mortgage loan secured by the residential real estate, with an EAD of $150,000 and an estimated LGD of 15 %. Supposing the customer’s PD is 3%, compute the capital requirement under the Basel II IRB approach, the standardized approach of Basel II, and under Basel I? Briefly discuss the results.

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