Use the following information on a one-year loan commitment to calculate the return on the loan commitment.
Question:
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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Related Book For
Financial Institutions Management
ISBN: 9780078034800
8th Edition
Authors: Anthony Saunders, Marcia Cornett
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