Metrobank offers one-year loans with a 9 percent stated or base rate, charges a 0.25 percent loan
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Metrobank offers one-year loans with a 9 percent stated or base rate, charges a 0.25 percent loan origination fee, imposes a 10 percent compensating balance requirement, and must pay a 6 percent reserve requirement to the Federal Reserve. The loans typically are repaid at maturity.
a. If the risk premium for a given customer is 2.5 percent, what is the simple promised interest return on the loan?
b. What is the contractually promised gross return on the loan per dollar lent?
c. Which of the fee items has the greatest impact on the gross return?
LO.1
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Related Book For
Financial Institutions Management A Risk Management Approach
ISBN: 9780073530758
7th Edition
Authors: Anthony Saunders, Marcia Cornett
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