CountrySide Bank uses the Moodys Analytics Portfolio Manager model 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 colla...

CountrySide Bank uses the Moodys Analytics Portfolio Manager model to evaluate the risk-return characteristics of the loans

Question:

CountrySide Bank uses the Moody’s Analytics Manager model to evaluate the risk-return characteristics of the loans in its 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 20 percent of the loan’s face value. The expected probability of default is 3 percent. What is the anticipated return on this loan? What is the risk of the loan? Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...