Question
A financial institution currently uses a base rate of 5%, charges an origination fee of 0.64% and requires a compensating balance of 15%. The Federal
A financial institution currently uses a base rate of 5%, charges an origination fee of 0.64% and requires a compensating balance of 15%. The Federal Reserve imposes a 10% reserve requirement on the bank's demand deposits. For a customer with a 3.6% risk premium, calculate the bank's ROA on the loan.
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Step: 1
ROA Interest Earned Origination Fee Total Assets Interest Earned Loan Amount x Risk Premium x 1 C...
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Financial Institutions Management A Risk Management Approach
Authors: Marcia Cornett, Patricia McGraw, Anthony Saunders
8th edition
978-0078034800, 78034809, 978-0071051590
