Financial Risk Management 2nd Assignment Dr. Fayez Tayem Show all Work Due Thursday Jan. 16 (NO Late Assignments) 1. Suppose that a bank does the following: 1. Sets a loan rate on a prospective loan at 10 percent (where BR = 6% and 6 = 4%). 2. Charges 0.15 percent loan origination fee to the borrower. 3. Imposes a 7 percent compensating balance requirement to be held as noninterest-bearing demand deposits. 4. Pays reserve requirements of 12 percent imposed by the Federal Reserve on the bank's demand deposits. 2. A bank offers one-year loans with a stated rate of 13 percent, but requires a compensating balance of 8 percent. What is the true cost of this loan to the borrower? How does the cost change if the compensating balance is 20 percent? 3. XY bank offers one-year loans with a 8 percent stated or base rate, charges a 0.30 percent loan origination fee, imposes a 9 percent compensating balance requirement, and must hold a 5 percent reserve requirement at the Federal Reserve. The loans typically are repaid at maturity. . narcent what is the simple promised wprs. 2. A bank offers one-year loans with a stated rate of 13 percent, but requires a compensating balance of 8 percent. What is the true cost of this loan to the borrower? How does the cost change if the compensating balance is 20 percent? 1. 0 .1