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can someone please help ASAP. i solve it but not confident enough with my result. thanks! A bank is using the RAROC to evaluate large
can someone please help ASAP. i solve it but not confident enough with my result. thanks! A bank is using the RAROC to evaluate large business loans. The bank's ROA is 1.2 percent and the ROE is 7.55 percent. The one-year loan interest rate is 8.00 percent and the bank must pay 7.40 percent to raise the funds. The cost to service the loan is 0.3 percent. If the loan defaults, 92 percent of the money lent will be lost. Based on historical default rates, the extreme worst-case loss scenario is about 5 percent. Should the bank make the loan? Yes, because the RAROC is 7.81 percent No, because the RAROC is 7.81 percent Yes, because the RAROC is 6.52 percent No, because the RAROC is 6.52 percent
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