Bank United has issued a one-year loan commitment of $8 million for an up-front fee of 15 basis points. The back-end fee on the unused portion of the commitment is 10 basis points. The bank requires a compensating balance of 6 per cent as demand deposits. The interest rate on the loan is 8 percent and reserve requirements on demand deposits are 7 per cent. The customer is expected to draw down 70 per cent of the commitment at the beginning of the year.

(i) What is the expected return on the loan without taking future values into consideration?

(ii) Discuss the expected annual return on the loan if the draw-down on the commitment does not occur at the end of six months?