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The duration of an approved $10 million loan is 4 years. The maximum increase in risk premium for bonds belonging to the same risk category

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The duration of an approved $10 million loan is 4 years. The maximum increase in risk premium for bonds belonging to the same risk category as the loan has been estimated to be 5.5%. If the fee income on this loan.is .4% and the spread over the cost of funds is 1%, what is the expected income on this loan for the current year? Hint: you are calculating the RAROC numerator. Write this answer down, you will need it for Question 13. One Year Net Income On Loan RAROC Loan (Asset) Risk or Capital at Risk DLN = -DLN * LN * (AR/(1+R)) $40,000 $100,000 $140,000 $280,000

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