Question
A bank estimates EL on loan portfolio A to be 2% per year, and VaR99.98% with a one-year time horizon to be 7% of the
A bank estimates EL on loan portfolio A to be 2% per year, and VaR99.98% with a one-year time horizon to be 7% of the outstanding loans. The spread between the cost of funds and the interest charged is 2.5%, and further administrative cost is 0.8%. (8 points) a) What is the RAROC of the loan portfolio? (3 points) b) Now suppose that the bank has the possibility to create second loan portfolio B with the same characteristics as the loan portfolio A. The correlation between the loan portfolios 0.5. What is the overall RAROC when the investment in loan portfolio A is three times as high as the investment in loan portfolio B? (3 points) c) What is the overall RAROC when the investment amounts are equal? (4 points)
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Who Is Your Competition You Real Estate Wholesaling Questions Answers And Tools To Help Beginners Crush Their Fears And Stop Procrastinating
Authors: Nick Zalonis
1st Edition
1716097193, 978-1716097195
