RosyBank isa well-diversified bank that lends to both consumers,and small and large corporations.In the past week its credit departmentreceived anumber of loan applications from different companies. The loan officer is ready to approve 25applications with a total volume of $125million. Each loan is $5million. All loans have equal risk and an interest rate of 4%.All loans have a 5 year maturity.Before sending the final approval to each company, you are asked to find an appropriate funding method. Your team in the liability management department has computed the marginal and total profit for each option. Note that the amount listed is the exact amount to be raised using this funding option.Funding optionAmount ($ million)Interest rateMarg. ProfitTotal Profit5-year CD752.60%1.4%$1.05 million3-year bond1252.80%0.9%$1.50 milliona.Discuss your preferred funding option and motivate your choice. Note: you need to choose 1 optionat this point.(5marks)After years of steady growth and maintaining a rather conservative risk profile the bank has recently been sold to a large institutional investor.The institutional investor, BigCapital LLC,aims to achieve an 18% ROE at Rosy Bank.We obtain the following additional information:Operating costs$100 millionEarning assets$2,500 millionTax rate35%Equity$300 millionb.Using your selected funding option under a., which interest rate does Rosy Bank charge on the new loans, keeping in mind the 18% ROE target?You dont need to take into account theyield on existingassets.(5marks)c.Assumenow thatthe cost of liabilities, the yield on assets, profit margin, and asset yieldis fixed. Which other actions might Rosy Bank take to achieve the 18% target ROE? List two actionsand motivate briefly