If a bank charges no fees and doesn't require a compensating balance, what credit spread must the bank charge on top of a base rate of 5% to have an expected return on the loan of 6%? The bank estimates a 3.5% probability of default, and it will earn a return of 0% if there is a default. O 9.84% O 3.5% 4.84% 8.50%

If a bank charges no fees and doesn't require a compensating balance, what credit spread must the bank charge on top of a base rate of 5% to have an expected return on the loan of 6%? The bank estimates a 3.5% probability of default, and it will earn a return of 0% if there is a default. O 9.84% O 3.5% 4.84% 8.50%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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