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Assume a bank grants a loan commitment at an interest rate of 10% per annum and the risk premium on the loan is 2%. The

Assume a bank grants a loan commitment at an interest rate of 10% per annum and the risk premium on the loan is 2%. The bank charges borrowers an upfront fee on the whole commitment of 0.25% and a back-end fee on any unused proportion of the loan of 0.5%. The compensating balance is 10% and so are reserve requirements. Assume that the average draw-down of the loan is 80% over the time of the loan commitment. What is the promised return on the loan commitment (round to two decimals)?

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