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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 5% per annum on a loan, and there is another 2% loan origination fee charged. Its cost of obtaining the funding for this loan is 2% per annum. According to the historical data, 73% of borrowers with similar characteristics defaulted when there was an adverse credit scenario, and typically the lenders were able to recover only 75% of loan amount on average once borrowers defaulted in those adverse credit scenarios. What is the Risk-Adjusted-Return-on-Capital of this loan if we use historical loan loss under the adverse credit scenario as the estimate of loan risk?

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