Questions and Problems: (Note: students will be responsible for checking each quostion to make sure it is free of mistakes with regard to numbers and information) Q14) CountrySide Bank uses Moody's Analytics Portfolio Manager to evaluate the risk- return characteristics of the loans in its portfolio. A specific $10 million loan earns 2 percent per year in fees, and the loan is priced at a 4 percent spread over the cost of funds for the bank. Because of collateral considerations, the loss to the bank if the borrower defaults will be 30 percent of the loan's face value. The expected probability of default is 5 percent. What is the anticipated return on this loan? What is the risk of the loan?
Questions and Problems: (Note: students will be responsible for checking each quostion to make sure it is free of mistakes with regard to numbers and information) Q14) CountrySide Bank uses Moody's Analytics Portfolio Manager to evaluate the risk- return characteristics of the loans in its portfolio. A specific $10 million loan earns 2 percent per year in fees, and the loan is priced at a 4 percent spread over the cost of funds for the bank. Because of collateral considerations, the loss to the bank if the borrower defaults will be 30 percent of the loan's face value. The expected probability of default is 5 percent. What is the anticipated return on this loan? What is the risk of the loan?
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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