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Piggy Bank is considering making a $1 million loan. The fee income plus the spread over the cost of funds is 0.3%. The worst case
Piggy Bank is considering making a $1 million loan. The fee income plus the spread over the cost of funds is 0.3%. The worst case scenario (1% probability) is that 8% of such loans default. When they do default normally only 30% of the loan value is recovered.
Calculate Piggy Banks RAROC.
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