Question
Carlyle Bank makes a loan to Matthew Hems. It has a base lending rate on loans of 11% and charges a risk premium of 3%
Carlyle Bank makes a loan to Matthew Hems. It has a base lending rate on loans of 11% and charges a risk premium of 3% on the loan. It does not charge an origination fee, but imposed compensating balances of 10%
The reserve requirements are 10%, and they do not pay interest.
a. What would be the approximate cost of the loan to Carl Hems?
b. What would be the return to the bank?
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International Financial Management
Authors: Jeff Madura
10th Edition
1439038333, 9781439038338
