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An A - rated corporate loan with a maturity of 3 years. A - rated corporate loans are evaluated using the mortality rate approach. A
An Arated corporate loan with a maturity of years. Arated corporate loans are
evaluated using the mortality rate approach. A schedule of historical defaults annually
and cumulative experienced by the bank on its Arated corporate loans is as follows:
A $ million, year loan to a BBBrated corporation in the computer parts industry. MC
Bancorp charges a servicing fee of basis points. The duration on the loan is years.
The cost of funds for the bank is percent. Based on years of historical data, the bank
has estimated the maximum change in the risk premium on the computer parts industry to
be approximately percent. The current market rate for loans in this industry is
percent.
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