Calculate the bank’s ROA on this loan.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
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Suppose that a bank does the following:

 

a. Sets a loan rate on a prospective loan with BR = 8.04% and ϕ = 4.15%.

b. Charges a 0.26 percent loan origination fee to the borrower.

c. Imposes a 14 percent compensating balance requirement to be held as noninterest-bearing demand deposits.

d. Holds reserve requirements of 9 percent imposed by the Federal Reserve on the bank’s demand deposits.

 

Calculate the bank’s ROA on this loan.

 

 

Note: Convert your answer to percentage format. Enter your answer rounded to 2 decimals, and without any units. So, for example, if your answer is 3.4568%, then just enter 3.46.

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