) A customer is remodeling his kitchen and is interested in financing kitchenappliances, which cost $8,000. A bank offers the customer a loan, if the customer pays a 10%down payment. The bank charges application fee of $50 and estimates that on average thebank collects $30 per year in late fees from similar customers. No monthly payments arerequired and the full amount of borrowing is due in 12 month. What interest rate should thebank charge if you know the following:? Bank's required return on equity is 12%? Equity allocation for consumer lendingdivision is 10%? Banks' tax rate is 40%? The bank can borrow at the current fedfunds rate.? Processing cost is $35 per loan.? Customer's credit score is 660.? It is expected that if the customerdefaults, the appliances could only beresold for 25% of original value.? Additionally, the customer is selfemployedand does not provide a proofof income. In such cases the bank adds2% to expected losses to coveradditional risk.