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Question 3: Assume the following expected income on the loan of $200,000: Interest Income rate on loans = 7% Interest expense rate on deposit accounts
Question 3: Assume the following expected income on the loan of $200,000: Interest Income rate on loans = 7% Interest expense rate on deposit accounts that will fund the loan = 5.5% Overhead expense rate to administer the loans .75% Expected loss rate on the loan = .40% . Part A. If the "economic capital" is $7,000 what is the Risk Adjusted Rate of Return? Input your answer in the XX.XX% format Part B. Should the bank make this loan if the expected hurdle rate is 15%? Input your answer as either Yes or No Question 3: Assume the following expected income on the loan of $200,000: Interest Income rate on loans = 7% Interest expense rate on deposit accounts that will fund the loan = 5.5% Overhead expense rate to administer the loans .75% Expected loss rate on the loan = .40% . Part A. If the "economic capital" is $7,000 what is the Risk Adjusted Rate of Return? Input your answer in the XX.XX% format Part B. Should the bank make this loan if the expected hurdle rate is 15%? Input your answer as either Yes or No
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