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Question I: ROA of a Loan (10 Points) First National Bank of Scranton offers a one-year loan with an 8% base rate. They charge a
Question I: ROA of a Loan (10 Points) First National Bank of Scranton offers a one-year loan with an 8% base rate. They charge a 0.5% origination fee, and force borrowers to maintain a 10% compensating balance. The Federal Reserve mandates a 5% reserve requirement. Loans are repaid at maturity a. If the risk premium for a customer is 48, what is the simple promised interest return on the loan? (5 points) b. What is the ROA of the loan? (In other words, what is the returns per dollar lent?) (5 points)
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