QUESTION 18

What is the lending rate for a customer with a probability of default of 1% and a loss given default of 28%. The funding rate is 6% and the VaR for the loan is 13 cents on the dollar. The bank benchmark is a 9.8% return on equity. Enter your answer as a decimal with three digits of precision and precede the decimal with a zero (i.e. 0.1234).