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A9. Assume a $500,000 loan has a duration of 2.5 years. The current interest rate level is 10% and a sudden change in the credit

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A9. Assume a $500,000 loan has a duration of 2.5 years. The current interest rate level is 10% and a sudden change in the credit premium of 1% is expected. Further assume that the one- year income on the loan is $2,500. What is the loan's RAROC (round to two decimals)? (a) 10.00%. (b) 11.00%. (c) 22.00% (d) 50.00%

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