A $2 million, five-year loan to a BBB-rated corporation in the computer parts industry. MC Bancorp charges a servicing fee of 75 basis points. The duration on the loan is 4.5 years. The cost of funds for the bank (the RAROC benchmark) is 8 percent. Based on four years of historical data, the bank has estimated the maximum change in the risk premium on the computer parts industry to be approximately 5.5 percent. The current market rate for loans in this industry is 10 percent. DLN = RAROC= Should the bank make the loan? *Someone reviewed this and claimed they needed more information to answer the question. That is not the case, the question is perfectly solvable with just this information. If you "Anonymous user" do not know how to solve it, please pass it on to someone else.
A $2 million, five-year loan to a BBB-rated corporation in the computer parts industry. MC Bancorp charges a servicing fee of 75 basis points. The duration on the loan is 4.5 years. The cost of funds for the bank (the RAROC benchmark) is 8 percent. Based on four years of historical data, the bank has estimated the maximum change in the risk premium on the computer parts industry to be approximately 5.5 percent. The current market rate for loans in this industry is 10 percent. DLN = RAROC= Should the bank make the loan? *Someone reviewed this and claimed they needed more information to answer the question. That is not the case, the question is perfectly solvable with just this information. If you "Anonymous user" do not know how to solve it, please pass it on to someone else.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A $2 million, five-year loan to a BBB-rated corporation in the computer parts industry. MC Bancorp charges a servicing fee of 75 basis points. The duration on the loan is 4.5 years. The cost of funds for the bank (the RAROC benchmark) is 8 percent. Based on four years of historical data, the bank has estimated the maximum change in the risk premium on the computer parts industry to be approximately 5.5 percent. The current market rate for loans in this industry is 10 percent.
DLN =
RAROC=
Should the bank make the loan?
*Someone reviewed this and claimed they needed more information to answer the question. That is not the case, the question is perfectly solvable with just this information. If you "Anonymous user" do not know how to solve it, please pass it on to someone else.
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