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show work fully. 1. In order to help fund a loan request of $10 million for one year from one of its best customers, Lone
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1. In order to help fund a loan request of $10 million for one year from one of its best customers, Lone Star Bank sold negotiable CDs to its business customers in the amount of $6 million at a promised annual yield of 2.75 percent and borrowed $4 million in the Federal funds market from other banks at today's prevailing interest rate of 2.80 percent. 1) Credit investigation and recordkeeping costs to process this loan application were an estimated $25,000. The Credit Analysis Division recommends a minimal 1 percent risk premium on this loan and a minimal profit margin of one-fourth of a percentage point. The bank prefers using cost-plus loan pricing in these cases. What loan rate should it charge? ( 5 points) 2) Please describe the steps for a loan officer to analyze Business Loan Applications. (5 Points)
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