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A bank is considering a loan applicant for a $9,750,0004-year loan. The servicing fee is expected to be 55 basis points and the bank's cost

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A bank is considering a loan applicant for a $9,750,0004-year loan. The servicing fee is expected to be 55 basis points and the bank's cost of funds, its RAROC benchmark, is 9%. The estimated maximum change in the borrower's risk premium is 7.2%. The loan's duration is 3.4956 years and current market interest rates for similar loans is 9.8%. Based on the RAROC model, should the bank make the loan? Why or why not? (10 points)

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