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Cici Bank charges an interest rate of 5 % per annum on a loan, and there is another 2 % loan origination fee charged. Its
Cici Bank charges an interest rate of per annum on a loan, and there is another loan origination fee charged. Its cost of obtaining the funding for this loan is per annum. According to the historical data, of borrowers with similar characteristics defaulted when there was an adverse credit scenario, and typically the lenders were able to recover only of loan amount on average once borrowers defaulted in those adverse credit scenarios. What is the RiskAdjustedReturnonCapital of this loan if we use historical loan loss under the adverse credit scenario as the estimate of loan risk?
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