Question
A one-year loan commitment has the following parameters, BR = FIs base interest rate on the loans = 10% = Risk premium on loan commitment
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A one-year loan commitment has the following parameters, BR = FIs base interest rate on the loans = 10% = Risk premium on loan commitment = 3% f1 = Upfront fee on the whole commitment = 20 bp f2 = Back-end fee on the unused commitment = 40 bp b = Compensating balance on loans = 9% RR = Reserve requirements = 9% td = Expected (average) takedown rate on the loan commitment = 65%. Whats the return on the loan commitment? (Answer the percentage number with two digits, e.g. if you get 0.03462, which is 3.462%, then write your answer as 3.46)
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Continuing from the previous question, if the expected takedown rate is 100% instead (and all other variables remain the same), what is the return on the loan commitment? (Again, answer the percentage number with two digits)
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