Use the following information on a one-year loan commitment to calculate the return on the loan commitment.

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Use the following information on a one-year loan commitment to calculate the return on the loan commitment.

BR FI’s base interest on the loans 8%

 Risk premium on loan commitment 2.5%

f1 Up-front fee on the whole commitment 25 basis points f2 Back-end fee on the unused commitment 50 basis points b Compensating balance on loans 10%

RR Reserve requirements 8%

td Expected (average) takedown rate on the loan commitment 70%

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Financial Institutions Management

ISBN: 9780078034800

8th Edition

Authors: Anthony Saunders, Marcia Cornett

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