Question $5$

a$)$ Explain what is meant by credit appraisal? What are the components of Credit

Appraisal?

b$)$ Baidu Bank Ghana $($ABG$)$ Ltd is a newly licensed bank in Ghana. ABG charges $2\%$

origination fees, $3\mathrm{.}50\%$ margin on loans with maturity above $3$ yrs$.$ The reference

benchmark rate for pricing the bank's loans is the Ghana Reference Rate $($GRR$).$ A

corporate client by name E$5$ limited is seeking to borrow GHS $200$m for $5yrs.$

i$)$ Calculate the Ghana Reference Rate

ii$)$ Calculate the expected Interest Rate to be paid by E$5$ Limited. What if the loan

is for $2$ years?

Assume current $91$ day rate is $28\mathrm{.}59\%,$ Interbank Rate is $29\mathrm{.}64\%$ and the Monetary Policy Rate

is $29\%.$ Cash Reserve Requirement is $15\%$ and Cash in Vault $($CIV$)$ is $2\%.$