Suppose a financial institution uses a loan base rate of 7.10% and sets the credit risk premium at 6.55%. The institution charges a 3.10% loan origination fee and imposes 3.85% compensating balances. The required reserves for this institution are 5%. Additionally suppose your institution specifies the following linear probability model to estimate the probability of default:

PD=0+1NumberofOutstandingLoans2Wealth3CreditScore

0=4,934.60

1=20.00

2=0.01

3=0.05

If the customer pledges 10% of the loan value as collateral, then what is the expected return on the loan?

Group of answer choices

16.65 %

6.65%

-79.26%

35.90%