1. A bank is considering a loan applicant for a $1,500,000 5-year loan. The servicing fee is expected to be 25 basis points and the banks cost of funds, its RAROC benchmark, is 7%. The estimated maximum change in the borrowers risk premium is 3.4%. The loans duration is 4.5 years and current market interest rates for similar loans is 10%. Based on the RAROC model, should the bank make the loan? Why or why not? (10 points)