Metrobank offers one-year loans with a 4 percent stated (or base rate), charges a 0.15 percent loan origination fee, imposes a 15 percent compensating balance requirement, and must pay an 8 percent reserve requirement to the Federal Reserve. The loans typically are repaid at maturity.

a) If the risk premium for a given customer is 1.5 percent, what is the simple promised interest return on the loan (this is solely just the interest rate)?

b) What is the contractually promised gross return (k) on the loan per dollar lent?