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ABC One Bank offers one-year loans with a 9 percent stated or base rate, charges a 0.25 percent loan origination fee, imposes a 10 percent
ABC One Bank offers one-year loans with a 9 percent stated or base rate, charges a 0.25 percent loan origination fee, imposes a 10 percent compensating balance requirement, and must hold a 6 percent reserve requirement at the Federal Reserve. The loans typically are repaid at maturity.
If the risk premium for a given customer is 2.27 percent, what is the simple promised interest return on the loan?
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