Formula Sheet Uncle Sam Thrift is a small localized bank that charges 50 basis points loan origination fee, and imposes a 4% compensating balance requirement on all customers. Prevailing base rate is 3.25% for bank loans, and reserve requirement is 6%. Kate is a new loan applicant who has a 15% assessed probability of default and has applied for a 1-year loan. The bank decides to impose (i) a 2.25% risk premium, and (ii) a collateral that allows for recovery of 75 per defauit. Question 10 What is the expected return from Kate's loan? 0/2 points a) 6.23% b) 0.00% c) -9.70% d) 3.90% e) 2.25% Formula Sheet Uncle Sam Thrift is a small localized bank that charges 50 basis points loan origination fee, and imposes a 4% compensating balance requirement on all customers. Prevailing base rate is 3.25% for bank loans, and reserve requirement is 6%. Kate is a new loan applicant who has a 15% assessed probability of default and has applied for a 1-year loan. The bank decides to impose (i) a 2.25% risk premium, and (ii) a collateral that allows for recovery of 75 per defauit. Question 10 What is the expected return from Kate's loan? 0/2 points a) 6.23% b) 0.00% c) -9.70% d) 3.90% e) 2.25%