(a) Suppose that a banks sole business is to lend in two regions of the world. The lending in each region has the same characteristics, spread between cost of funds and interest charges is 2.5%, administrative costs are 0.7% and expected losses are 1%. Lending to Region A is six times as great as lending to Region B. The correlation between loan losses in the two regions is 0.85. Assume the economic capital in each region per $100 of loans is $4. Estimate the total RAROC.